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Concert Social
Awareness Fund
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SEMI - ANNUAL REPORT
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July 31, 1997
[Smith Barney Logo]
Smith Barney Mutual Funds
Investing for your future.
Every day(SM).
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Concert Social
Awareness Fund
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The Concert Social Awareness Fund seeks high total return consisting of current
income and capital appreciation. The Fund's investment objectives will be
achieved by investing in a variable combination of stocks and bonds issued by
companies that, in the opinion of the Fund's port folio managers, make a
positive contribution to society through their products and services or through
the way that they do business. In addition, the Fund will avoid companies that
are engaged in activities that could have a negative social impact.
Concert Social Awareness Fund's
Average Annual Total Returns Ended
July 31, 1997
Without Sales Charge*
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Class A Class B Class C
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Six-Month+ 15.36% 14.89% 14.87%
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One-Year 29.99 28.99 29.00
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Five-Year N/A 13.41 N/A
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Ten-Year N/A 11.58 N/A
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Since Inception++ 15.42 11.71 13.67
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Without Sales Charge*
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Class A Class B Class C
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Six-Month+ 9.59% 9.89% 13.87%
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One-Year 23.51 23.99 28.00
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Five-Year N/A 13.29 N/A
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Ten-Year N/A 11.58 N/A
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Since Inception++ 14.20 11.72 13.67
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* Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
** Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 5.00%; Class B shares reflect the
deduction of a 5.00% CDSC, which applies if shares are redeemed less than
one year from initial purchase and declines thereafter by 1.00% per year
until no CDSC is incurred. Class C shares reflect the deduction of a 1.00%
CDSC, which applies if shares are re deemed within the first year of
purchase.
All figures represent past performance and are not a guarantee of
future results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
++ Inception dates for Class A, B and C shares are November 6, 1992, February
2, 1987 and May 5, 1993, respectively.
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OUR INVESTMENT PHILOSOPHY
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At Smith Barney Mutual Funds, your investment needs come first. Our goal is to
deliver consistent and competitive returns over time, using a wide range of
investment strategies.
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NASDAQ SYMBOL
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Class A SSIAX
Class B SESIX
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WHAT'S INSIDE
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Shareholder Letter.................................................... 1
An Interview with Portfolio Managers
Robert J. Brady, CFA, and
Ellen S. Cammer....................................................... 5
Historical Performance................................................ 8
Concert Social Awareness
Fund at a Glance..................................................... 10
Schedule of Investments.............................................. 11
Statement of Assets and Liabilities.................................. 15
Statement of Operations.............................................. 16
Statements of Changes in Net Assets.................................. 17
Notes to Financial Statements........................................ 18
Financial Highlights................................................. 22
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Shareholder Letter
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[PHOTO OMITTED]
HEATH B. MCLENDON
Chairman
[PHOTO OMITTED]
ELLEN S. CAMMER
Investment Officer
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ROBERT J. BRADY, CFA
Investment Officer
Dear Shareholder:
We are pleased to provide the semi-annual report for the Concert Social
Awareness Fund ("Fund") for the period ended July 31, 1997. In this report, we
summarize the period's prevailing economic and market conditions and outline
our portfolio strategy. A detailed summary of performance and current holdings
can be found in the appropriate sections that follow. In addition, the Fund's
managers, Robert J. Brady, CFA, and Ellen S. Cammer, share some insights into
the Fund's investment philosophy in an interview that appears on page five.
Investment Objective and Performance
The Fund seeks to provide high total return made up of current income and
capital appreciation, through a carefully determined balance of stocks and bonds
of issuers who demonstrate a positive awareness of their impact on the society
within which they operate. Under normal market conditions, the Fund will have
between 65% and 85% of its assets invested in stocks and between 15% and 35% in
bonds. The mix of the Fund's investments may vary from time to time to reflect
current market conditions.
Over the six months covered by this report, the Fund generated a total return of
15.36% for Class A shares. Over the same period, the S&P 500 Index ("S&P 500")
posted a total return of 22.54%, and the Lehman Brothers Government/Corporate
Bond Index re turned 5.76%. In the annual report dated January 31, 1997, we
announced a shift in the Fund's asset allocation guidelines that emphasizes a
greater exposure to stocks. We are pleased to announce that we are on schedule
for achieving our stated target range of approximately 65% to 85% stock
representation among the Fund's holdings. As of July 31, 1997, stocks
represented 58% of the Fund's assets and bonds represented 37% of total
portfolio assets.
Stock Market Update and Portfolio Changes
After a slow start during the quarter ended April, the stock market moved into
full gear and ran on all cylinders for the remaining three months ended July 31,
1997. Although the outstanding performance of many large companies has been well
documented, overall market breadth across the stock population improved
noticeably during the period. Some 80% or more of the six-month price gain for
the stock market occurred in the last three months, with small- to mid-sized
companies doing much better than before. The six-month market gains, fueled by
strong inflows of investment dollars, were supported by continued improvement in
fundamentals (i.e. interest rates declined 6% - 8% and earnings rose another 5%
- - 10%).
We have resisted the temptation to simply equate higher stock prices with
excessive speculation. Given the economic world that we are operating in -- low
inflation, positive interest rates, and strong profits and cash flows -- we
believe the long-term values behind this market remain solid. However, over the
summer, momentum became almost too strong, raising concerns for many investors
that the stock market might be overvalued. Most stocks participated to varying
degrees in the market advance, with few real laggards. The sustained stock
market advance and relatively high stock
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Concert Social Awareness Fund 1
<PAGE>
valuations often made it more difficult to find under valued stocks that fit our
investment discipline. Nevertheless, we have met our goal of conforming the
Fund to its new social awareness orientation (approximately 78% of our
individual sell transactions during this period reflected this divesting
process).
During the last six months, technology, financial, capital goods, consumer
cyclical and health care issues made up the best-performing market sectors. In
contrast, the various infrastructure sectors such as utilities, communications
services, energy and basic materials largely underperformed. The current sector
weightings within the Fund's portfolio generally complimented the Fund's
performance.
Over the period, we bought nine new companies and added to 14 existing holdings.
The new names represent a diverse list: Dollar General, Sysco Systems and
Wal-Mart in the consumer sector; Provident Cos. in finance; Cisco Systems,
Pitney Bowes and Worldcom in technology/capital goods; and Norfolk Southern and
Southwest Air in transportation. These new additions to the Fund also illustrate
our socially aware approach to investing. For example, Dollar General, a major
retailer, maintains active community involvement by sponsoring programs such as
training welfare recipients to be self-sufficient and hires them as interns in
company stores.
As of July 31, 1997, the Fund owned 66 stocks, with an emphasis in consumer
cyclical, financial, technology and transportation issues. In addition, we
continue to maintain a high quality orientation in the Fund's holdings, with an
average Standard and Poor's Rating Service ranking of B+ and an average dividend
yield of approximately 1.2%, versus a 1.7% for the S&P 500 Index. In selecting
stocks for the Fund, we tend to favor mid- to large-sized companies, with an
average market capitalization of $25.2 billion. On balance, the stocks held in
the Fund's portfolio trade at slightly below the market's average
price-to-earnings ratio and we anticipate better long-term growth potential from
the Fund's stocks relative to their purchase price.
Bond Market Update and Portfolio Changes
Strong economic activity in the first quarter of the year coupled with a low
unemployment rate sparked fears of renewed investor concerns over higher
inflationary pressure. As a result, on March 25, 1997, the Federal Reserve
("Fed") raised the federal-funds rate from 5.25% to 5.50%. (The federal-funds
rate is the interest rate banks charge each other for overnight loans and is a
closely watched indicator of the direction of interest rates.) This action was
the first interest rate hike in over two years and bond investors remained
concerned through the end of April that similar moves might follow.
However, second quarter data showed subdued economic momentum with declining
retail sales and significantly weaker auto sales. Since the end of April, the
yield on the benchmark 30-year U.S. Treasury bond has declined dramatically from
a high over 7% to approximately 6.30% at the end of July, with July posting the
majority of the gain. While consumer sentiment indicators remain at high levels
and suggest that most consumers view the future brightly, spending has not
reached levels that would cause the Fed to tighten monetary policy further.
Corporate investment in new plants and equipment to improve efficiency made up
most of the spending in the economy during the last six months.
On the employment front, we still see a robust job market, albeit with limited
wage gains and no indication that the historically low employment rate is
spurring an increase in inflationary pressures. Moreover, in the second quarter
of 1997, strong federal tax revenues also led to a record budget surplus and a
$60 billion paydown on the government debt. This dramatic improvement in
government finances coupled with the macroeconomic forces driving inflation
lower (in creased productivity and globalization of world markets) led to a bond
market rally despite strong U.S. economic growth.
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2 1997 Semi-Annual Report to Shareholders
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During the six months covered by this report, interest rates have fallen across
the maturity spectrum. For example, yields on shorter-maturity securities in the
two- to three-year range declined 15-25 basis points, or 0.15% to 0.25%,
although they declined 80-90 basis points from the highs early in the second
quarter ending at the lows for the period of 5.72% and 5.78% for 2 and 3 year
U.S. Treasury notes, respectively. As of July 31, 1997 the yield on the 30-year
U.S. Treasury bond was 6.29%, the low for the period covered by this report and
50 basis points lower than at the start with a high of 7.16% reached in
mid-April. The decline in interest rates during the reporting period helped the
Lehman Government/Corporate Bond Index post a 5.76% total return for the
six-month period.
In response to subdued inflation and the moderating pace of economic growth over
the second quarter, we extended the fixed income portion of the Fund's duration
from approximately 43 1/44 years to 53 1/44 years. (Duration is a measure of
volatility relative to a given change in interest rates.) We also reduced our
exposure to mortgage-backed securities, with the expectation of declining
interest rates. After being one of the best-performing sectors over the first
half of this year, we believe other asset classes now offer better relative
value performance in this economic environment. In addition, we added corporate
bonds to the Fund's holdings, including names such as Xerox, American Ex press,
Norfolk Southern, Worldcom and Chase Manhattan Bank. As of July 31, 1997, the
fixed income component of the Fund was allocated among the following areas: 40%
government agency bonds, 32% corporate bonds, 16% mortgage-backed securities and
12% asset-backed securities.
Outlook
We expect the second half of the Fund's fiscal year to bring heightened
volatility in the stock market. In our view, the market's valuation appears more
"fairly" valued than undervalued and we believe that it will remain very
sensitive to perceived or actual changes in the underlying economic conditions
that help to determine prices. Along those lines, interest rates should remain
in a trading range so price/earnings multiples will not evidence a decided trend
in either direction. Moreover, we expect corporate earnings growth to slow,
which means more companies will have difficulty delivering what is expected. In
fact, the earnings expectations at the analyst level for 1998 appear quite
optimistic vis a vis what economists and strategists are anticipating.
Accordingly, the Fund's stock strategy in the months ahead will attempt to
reduce the Fund's risk profile, to something less than the market's, by focusing
specifically on each company's ability to produce earnings growth in a perhaps
tougher profits environment.
On the fixed-income side, we anticipate a narrow trading range environment for
interest rates over the next several months as investors await third-quarter
economic results. Fed Chairman Alan Greenspan has given the green light to allow
for somewhat faster U.S. economic growth if inflation appears well contained. If
growth is too robust we do not rule out the potential for another increase in
short-term interest rates by the Fed. We also expect to see increased volatility
as fears of higher inflationary pressure resurface. However, we believe that
the globalization of the world economy, along with the increased productivity
and flexibility of many U.S. companies, should enable the U.S. economy to
continue along its present path of non-inflationary and moderate growth.
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Concert Social Awareness Fund 3
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On a more somber note, we are saddened by the loss of two outstanding business
leaders and Trustees of the Fund, Antoinette C. Bentley and Madelon DeVoe
Talley. Their knowledge and wisdom will be missed.
Thank you for your investment in the Concert Social Awareness Fund. We look
forward to continuing to help you pursue your goals.
Sincerely,
/s/ Heath B. McLendon /s/ Robert J. Brady
Heath B. McLendon Robert J. Brady, CFA
Chairman Investment Officer
/s/ Ellen S. Cammer
Ellen S. Cammer
Investment Officer
August 25, 1997
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Top Ten Holdings* As of July 31, 1997
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1. American Express Co. 3.5%
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2. Chase Manhattan Corp. 3.2
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3. Schering-Plough Corp. 3.1
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4. Aluminum Co. of America 3.0
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5. Xerox Corp. 3.0
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6. American Stores Co. 2.8
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7. Lucent Technologies, Inc. 2.8
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8. Praxair, Inc. 2.8
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9. Compaq Computer Corp. 2.6
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10. Tenet Healthcare Corp. 2.6
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* As a percentage of total common stock.
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4 1997 Semi-Annual Report to Shareholders
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An Interview with Portfolio Managers Robert J. Brady and Ellen S. Cammer
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A Tradition of Leadership in Socially Aware Investing
Portfolio Managers Robert J. Brady, CFA and Ellen Cammer recently spoke with us
about the Concert Social Awareness Fund and shared some insights regarding their
investment style. Bob, through the CORE, Relative Value and Socially Responsible
Investment individual account programs as well as his co-management of this
fund, has direct or shared responsibility for the management of approximately $2
billion in assets. In addition to his over 30 years of investment experience,
Bob is also a Chartered Financial Analyst ("CFA"). Ellen, co-manager of the
Concert Social Awareness Fund, is responsible for $2 billion in assets. She also
currently heads one of the firm's individual fixed-income account units that
includes government securities management, municipal management and active
quantitative management. She has a B.F.A. from Windham College and an M.B.A.
from Fordham University.
Not many investors know that Smith Barney has been a leader in socially aware
investing for a decade. Can you tell us more about the Firm's leadership in this
area?
Bob: We've been managing socially aware portfolios for Smith Barney clients
since the mid-1980s. We have between $500 million and $600 million in assets in
individually managed accounts in addition to roughly $400 million in the Fund.
The significant amount of socially aware assets we manage has made us highly
visible in the national socially aware investment community. More importantly,
our experience has shown that investors didn't have to sacrifice investment
return to apply social considerations to their investments.
Bob, why should investors consider investing in the Concert Social Awareness
Fund?
Bob: We believe that there will prove to be a connection between companies that
maintain a positive social awareness and their long-term success. For example,
companies that are proactive environmentally can usually avoid costly litigation
and expensive clean-up costs. In addition, companies that create diverse and
professionally satisfying workplaces generally attract the most talented people
who in turn help to increase both productivity and profitability. In other
words, being socially responsible can oftentimes be very good for the bottom
line.
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Environmental Benefits
Traditionally, corporate environmental spending has been viewed primarily as a
liability. Yet many people realize intuitively that it makes sense that there is
a link between sound environmental policies and strong financial performance.
Corporate environmental efficiency generally means having to use fewer resources
and generating less waste. In other words, environmentally proactive companies
benefit from simple economic efficiency. Some of the companies that we have
invested in that have put these principles into practice include:
o Enron, primarily a natural gas provider, helped pioneer large-scale,
affordable renewable energy projects, including the world's largest solar
power plants.
o Lucent Technologies, a telecommunications equipment supplier, incorporates
"Design for Environment" criteria in all stages of its product
development.
o Pitney Bowes, a manufacturer of energy efficient business equipment, has
implemented a "zero discharge" program that has drastically reduced its
hazardous waste generation.
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Concert Social Awareness Fund 5
<PAGE>
Ellen, why the sudden surge of interest in socially aware investing?
Ellen: Socially aware investing has moved into the mainstream of America as a
consequence of some very specific demographic and business trends that are
evident in the economy today. We have identified two simultaneous trends that
make it clear that socially aware investing is here to stay. On the business
side, we see solid evidence of a convergence between social interests and
business interests. Socially aware investors, or the people who are interested
in the social ramifications of business decision making, are looking at issues
such as the environment, corporate diversity policies and practices and a
company's involvement and visibility in the local community before they invest
their hard-earned money.
We believe that good, well-managed companies understand that the way to
successfully compete in today's world is to build strong consumer franchises,
brand-name recognition and good reputations for both their products and their
work force. They do this not only via their products and services but in their
business dealings and in the community, and the career opportunities they offer
to their employees. We think this trend will clearly differentiate companies
over time.
Ellen, are there any specific investment areas that you tend to avoid?
Ellen: Although the world of social investing has become more supportive rather
than punitive, there are certain areas that we avoid. For example, we will not
invest in any companies that do significant damage to the environment or
companies engaged in tobacco production.
Bob, can you give us an idea of some of the types of companies you're talking
about?
Bob: We have invested in companies like Chase Manhattan, American Express,
Xerox, Unilever and Lucent Technologies. You can get a flavor that these are
large and mid-to-large-cap stocks that are in many
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Community Involvement Can
Strengthen Client Relationships
Community involvement brings visibility and strengthens a company's consumer
franchise. Here are two companies that have been among the Fund's holdings and
maintain active community involvement:
o Xerox, a leading office equipment manufacturer, has a unique "social
service leave" program. This program sponsors select employees to work for
one year in a nonprofit organization.
o Dollar General, a major retailer, sponsors a program that trains welfare
recipients to be self-sufficient and hires them as interns in company
stores.
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mainstream investment portfolios, but they are also companies we are very
comfortable with from a social awareness standpoint. But each one may pass
social muster for different reasons. Some of these companies have very active
community investment programs, some have outstanding employee relationship
programs such as day care centers or flexible hours. All of these kinds of
efforts are considered and weighed when determining a company's social profile.
However, if a company changes so that our social analysis goes negative we will
look to sell its stock. In the Concert Social Awareness Fund, social
considerations are an important compliment to our investment decision-making.
Ellen, what makes your investment approach different from the competition?
Ellen: It's the totality of our social investment program that makes us
different, not just one specific issue. Our approach reflects much more of a
total philosophy that captures both financial and non-financial business
factors. We conduct our own proprietary research on both sides of that equation.
We construct portfolios that are invested in good solid
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6 1997 Semi-Annual Report to Shareholders
<PAGE>
companies that understand that they have a responsibility to be a positive
influence on the environment in which they operate. It's much more than simply
avoidance of certain constraints. There are a limited number of managers out
there who share our approach, and even fewer mutual fund managers.
Bob, some skeptics have remarked that the jury is still out on socially aware
investing and that it is too subjective. Is there any way to objectively measure
the performance of a socially aware portfolio?
Bob: We believe that the debate about relative performance has been won. We can
look at our long-term experience, or the Domini Social Index, which measures the
performance of 400 companies that pass a number of social screens. In either
case, performance has been highly comparable with non-screened results. We think
that future discussion will center around how social awareness can add value to
investment performance.
Bob and Ellen, thanks for spending some time with us today.
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Taking Care of Business,
Taking Care of Employees
The Fund looks for companies that offer comprehensive employee benefits that can
help people balance the demands of work and family and encourage a diverse work
force. These benefit programs can also lead to lower employee turnover and
higher productivity. Some notable companies that pursue these policies include:
o St. Paul Companies, a property and casualty insurer, offers on-site child
care, flexible work arrangements and other family care resources. Since
adding these benefits, St. Paul has had one of the lowest employee
turnover rates in its industry.
o Liz Claiborne, a major fashion designer and retailer, has established a
broad set of programs to prevent contract labor abuse, as well as
providing flextime, job sharing, dependent care resources and diversity
training.
o Intel, the world's premier computer chip manufacturer, offers employees
generous profit-sharing and stock option programs, a sabbatical program
and on-site child care at many of its facilities.
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Concert Social Awareness Fund 7
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Historical Performance -- Class A Shares
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Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Period Ended Of Period Of Period Dividends Distributions Returns(1)
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7/31/97 $ 19.36 $ 22.01 $ 0.29 $ 0.00 15.36%+
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1/31/97 19.00 19.36 0.60 1.32 12.41
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1/31/96 15.91 19.00 0.52 0.52 26.47
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1/31/95 17.72 15.91 0.47 0.66 (3.82)
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1/31/94 16.85 17.72 0.56 1.46 17.80
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Inception* -- 1/31/93 16.80 16.85 0.11 0.85 6.12+
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Total $ 2.55 $ 4.81
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Historical Performance -- Class B Shares
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Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Period Ended Of Period Of Period Dividends Distributions Returns(1)
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7/31/97 $ 19.42 $ 22.07 $ 0.22 $ 0.00 14.89%+
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1/31/97 19.05 19.42 0.45 1.32 11.60
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1/31/96 15.97 19.05 0.42 0.52 25.58
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1/31/95 17.79 15.97 0.35 0.66 (4.54)
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1/31/94 16.84 17.79 0.34 1.46 16.88
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1/31/93 17.26 16.84 0.50 1.49 9.68
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1/31/92 15.61 17.26 0.55 0.88 19.96
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1/31/91 15.57 15.61 0.51 0.46 6.80
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1/31/90 15.03 15.57 0.71 0.38 10.76
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1/31/89 13.62 15.03 0.48 0.11 15.10
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Inception* -- 1/31/88 14.00 13.62 0.23 0.07 (0.57)+
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Total $ 4.76 $ 7.35
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Historical Performance -- Class C Shares
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Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Period Ended Of Period Of Period Dividends Distributions Returns(1)
================================================================================
7/31/97 $ 19.46 $ 22.11 $ 0.22 $ 0.00 14.87%+
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1/31/97 19.08 19.46 0.45 1.32 11.65
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1/31/96 15.97 19.08 0.42 0.52 25.77
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1/31/95 17.79 15.97 0.35 0.66 (4.54)
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Inception* -- 1/31/94 17.54 17.79 0.28 1.46 11.83+
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Total $ 1.72 $ 3.96
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8 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Historical Performance -- Class Y Shares
================================================================================
Net Asset Value
--------------------
Beginning End Income Capital Gain Total
Period Ended Of Period Of Period Dividends Distributions Returns(1)
================================================================================
7/31/97 $ 19.39 $ 22.05 $ 0.32 $ 0.00 15.55%+
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Inception* -- 1/31/97 19.00 19.39 0.49 1.32 11.94+
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Total $ 0.81 $ 1.32
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It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
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Average Annual Total Return
================================================================================
Without Sales Charge(1)
---------------------------------------------
Class A Class B Class C Class Y
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Six Months Ended 7/31/97+ 15.36% 14.89% 14.87% 15.55%
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Year Ended 7/31/97 29.99 28.99 29.00 30.43
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Five Years Ended 7/31/97 N/A 13.41 N/A N/A
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Ten Years Ended 7/31/97 N/A 11.58 N/A N/A
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Inception* through 7/31/97 15.42 11.71 13.67 21.17
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Without Sales Charge(2)
---------------------------------------------
Class A Class B Class C Class Y
================================================================================
Six Months Ended 7/31/97+ 9.59% 9.89% 13.87% 15.55%
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Year Ended 7/31/97 23.51 23.99 28.00 30.43
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Five Years Ended 7/31/97 N/A 13.29 N/A N/A
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Ten Years Ended 7/31/97 N/A 11.58 N/A N/A
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Inception* through 7/31/97 14.20 11.72 13.67 21.17
================================================================================
================================================================================
Cumulative Total Return
================================================================================
Without Sales Charge(1)
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Class A (Inception* through 7/31/97) 97.19%
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Class B (7/31/87 through 7/31/97) 199.21
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Class C (Inception* through 7/31/97) 72.15
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Class Y (Inception* through 7/31/97) 29.35
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 5.00%; Class B shares reflect the
deduction of a 5.00% CDSC, which applies if shares are redeemed less than
one year from initial purchase and declines thereafter by 1.00% per year
until no CDSC is incurred. Class C shares reflect the deduction of a 1.00%
CDSC, which applies if shares are redeemed within the first year of
purchase.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception dates for Class A, B, C and Y shares are November 6, 1992,
February 2, 1987, May 5, 1993 and March 28, 1996, respectively.
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Concert Social Awareness Fund 9
<PAGE>
================================================================================
Concert Social Awareness Fund at a Glance (unaudited)
================================================================================
Growth of $10,000 Invested in Class B Shares of the
Concert Social Awareness Fund vs. the Lehman Government/Corporate Bond Index,
Lehman Government/Corporate Long-Term Bond Index and Standard &Poor's 500
Index
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[GRAPHIC OMITTED]
July 1987-- July 1997
+ Hypothetical illustration of $10,000 invested in Class B shares on July
31, 1987, assuming reinvestment of dividends and capital gains, if any, at
net asset value through July 31, 1997. The Lehman Government/Corporate
Bond Index is a combination of the Government and Corporate Bond indexes,
including U.S. Treasury and Agency securities and Yankee Bonds. The Lehman
Government/Corporate Long-Term Bond Index is a combination of Government
and Corporate bonds with maturities of 10 years or more. The Standard &
Poor's 500 Index is composed of widely held common stocks listed on the
New York Stock Exchange, American Stock Exchange and over-the-counter
market. Figures for the index include reinvestment of dividends. The
indexes are unmanaged and are not subject to the same management and
trading expenses as a mutual fund. The performance of the Fund's other
classes may be greater or less than the Class B shares' performance
indicated on this chart, depending on whether greater or lesser sales
charges and fees were incurred by shareholders investing in other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No
adjustment has been made for shareholder tax liability on dividends or
capital gains.
Industry Diversification*
- --------------------------------------------------------------------------------
[The following table was represented as a bar graph in the printed material]
Basic Materials 6.8%
Communication Services 3.0%
Consumer Cyclicals 19.1%
Consumer Staples 9.6%
Financial Services 26.0%
Healthcare 10.3%
Office Equipment & Supplies 1.0%
Technology 20.3%
Transportation 2.5%
Utilities 1.5%
Investment Breakdown
- --------------------------------------------------------------------------------
[The following table was represented as a pie chart in the printed material]
Repurchase Agreement 4.5%
Mortgage-Backed Securities 6.1%
Corporate Bonds and Notes 11.8%
Asset-Backed Securities 4.3%
Municipal bonds 0.3%
Common Stock 58.4%
U.S. Government Obligations 14.6%
- --------------------------------------------------------------------------------
10 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedule of Investments (unaudited) July 31, 1997
================================================================================
SHARES SECURITY VALUE
================================================================================
COMMON STOCK -- 58.4%
Basic Materials -- 3.8%
75,000 Aluminum Co. of America $ 6,637,500
80,000 Engelhard Corp. 1,720,000
115,000 Praxair, Inc. 6,339,375
- --------------------------------------------------------------------------------
14,696,875
- --------------------------------------------------------------------------------
Communication Services -- 1.8%
93,200 MCI Communications Corp. 3,291,125
100,000 WorldCom Inc.+ 3,493,750
- --------------------------------------------------------------------------------
6,784,875
- --------------------------------------------------------------------------------
Consumer Cyclicals -- 11.1%
38,800 Dillards Department Stores, Inc., Class
A Shares 1,467,125
60,000 Dollar General Corp. 2,640,000
17,200 Fleetwood Enterprises, Inc. 557,925
90,000 Home Depot, Inc. 4,488,750
25,000 ITT Corp.+ 1,598,437
193,400 Kaufman & Broad Home Corp. 4,133,925
74,700 Liz Claiborne, Inc. 3,576,262
90,500 May Department Stores Co. 5,056,687
29,000 Nine West Group, Inc.+ 1,161,813
14,352 Payless Shoesource, Inc.+ 882,648
55,000 Pep Boys - Manny, Moe & Jack Co. 1,828,750
51,800 Philips Electronics NV 4,237,888
50,000 Rite Aid Corp. 2,596,875
55,100 Toys 'R' Us Inc.+ 1,876,844
33,500 VF Corp. 3,006,625
92,000 Wal-Mart Corp. 3,455,750
- --------------------------------------------------------------------------------
42,566,304
- --------------------------------------------------------------------------------
Consumer Staples -- 5.6%
244,000 American Stores Co. 6,161,000
97,400 Kroger Co.+ 2,879,387
65,000 Newell Co. 2,725,938
35,000 Sysco Corp. 1,305,938
25,000 Unilever NV 5,450,000
115,000 Wendy's International, Inc. 2,810,313
- --------------------------------------------------------------------------------
21,332,576
- --------------------------------------------------------------------------------
Financial Services -- 15.2%
45,000 Ace Ltd. 3,690,000
70,547 Allstate Corp. 5,573,213
93,300 American Express Co. 7,813,875
60,000 Associates First Capital Corp. 3,956,250
50,622 BankAmerica Corp. 3,821,961
35,000 Bank of Boston Corp. 2,972,812
49,000 Bay Apartment Communities, Inc. 1,883,437
62,088 Chase Manhattan Corp. 7,050,868
105,200 Federal Home Loan Mortgage Corp. 3,793,775
64,800 H.F. Ahmanson & Co. 3,446,550
25,000 Hartford Financial Services, Inc. 2,178,125
30,900 J.P. Morgan & Co. 3,580,537
42,200 Lincoln National Corp. 3,001,475
See Notes to Financial Statements
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 11
<PAGE>
================================================================================
Schedule of Investments (unaudited)(continued) July 31, 1997
================================================================================
SHARES SECURITY VALUE
================================================================================
Financial Services -- 15.2% (continued)
23,100 Mid Ocean Ltd. $ 1,397,550
15,000 Provident Cos., Inc. 950,625
35,400 St. Paul Cos., Inc. 2,776,688
- --------------------------------------------------------------------------------
57,887,741
- --------------------------------------------------------------------------------
Healthcare -- 6.0%
56,700 Amgen, Inc. 3,334,669
75,000 DENTSPLY International Inc. 4,059,375
128,000 Schering-Plough Corp. 6,984,000
30,000 SmithKline Beecham PLC Units ADR 2,917,500
190,500 Tenet Healthcare Corp.+ 5,703,094
- --------------------------------------------------------------------------------
22,998,638
- --------------------------------------------------------------------------------
Office Equipment & Supplies -- 0.6%
30,000 Pitney Bowes, Inc. 2,253,750
- --------------------------------------------------------------------------------
Technology -- 11.9%
79,900 Beckman Instruments, Inc. 3,880,144
40,000 Cisco Systems, Inc.+ 3,182,500
100,000 Compaq Computer Corp.+ 5,712,500
65,000 Computer Associates International, Inc. 4,424,062
65,000 EMC Corp.+ 3,282,500
40,000 Intel Corp. 3,672,500
44,800 International Business Machines Corp. 4,737,600
72,963 Lucent Technologies, Inc. 6,197,295
45,000 Motorola, Inc. 3,614,062
80,000 Xerox Corp. 6,580,000
- --------------------------------------------------------------------------------
45,283,163
- --------------------------------------------------------------------------------
Transportation -- 1.5%
75,000 Mesaba Holdings, Inc.+ 1,265,625
20,000 Norfolk Southern Corp. 2,215,000
75,000 Southwest Airlines Co. 2,189,063
- --------------------------------------------------------------------------------
5,669,688
- --------------------------------------------------------------------------------
Utilities -- 0.9%
86,100 Enron Corp. 3,266,419
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $133,465,810) 222,740,029
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
====================================================================================================
CORPORATE BONDS AND NOTES -- 11.8%
<C> <S> <C>
Financial Services -- 5.4%
$2,000,000 American Express Co., Unsecured Sr. Notes, 6.750% due 6/23/04 2,040,000
2,500,000 Associates Corp. North American, Notes, 7.250% due 9/1/99 2,556,250
2,000,000 Banker's Trust Institutional, Preferred Capital Securities,
7.750% due 12/1/26++ 1,982,500
2,000,000 Chase Manhattan Bank, Medium Term Notes, 5.875% due 8/4/99 1,995,000
2,000,000 Dean Witter Discover & Co., Notes, 6.000% due 3/1/98 2,005,980
3,000,000 Household Finance Corp., Sr. Notes, 7.510% due 3/10/98 3,035,580
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Schedule of Investments (unaudited)(continued) July 31, 1997
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
====================================================================================================
<C> <S> <C>
Financial Services -- 5.4% (continued)
$2,000,000 John Deere Capital Corp., Medium Term Notes,
5.500% due 4/15/98 $ 1,998,940
1,000,000 Merrill Lynch & Co. Inc., Notes, 6.000% due 1/15/01 993,750
2,000,000 Swiss Bank Corp. NY, Sub. Notes, 7.375% due 6/15/17 2,092,500
2,000,000 Xerox Capital Trust I, 8.000% due 2/1/27 2,112,500
- ----------------------------------------------------------------------------------------------------
20,813,000
- ----------------------------------------------------------------------------------------------------
Industrial -- 2.3%
1,500,000 Case Corp., Notes, 7.250% due 8/1/05 1,541,250
1,100,000 Cummins Engine Inc., Debentures, 6.750% due 2/15/27 1,113,750
2,000,000 Service Corp. International, Senior Notes, 7.000% due 6/1/15 2,060,000
2,000,000 Tenet Healthcare Corp., Sr. Notes, 8.625% due 12/1/03 2,130,000
2,000,000 Time Warner Inc., Pass Through Asset, 6.100% due 12/30/01++ 1,957,500
- ----------------------------------------------------------------------------------------------------
8,802,500
- ----------------------------------------------------------------------------------------------------
Technology -- 0.4%
1,500,000 Lucent Technologies, Inc., Notes, 7.250% due 7/15/06 1,575,000
- ----------------------------------------------------------------------------------------------------
Transportation -- 0.7%
2,000,000 Norfolk Southern Corp., Notes, 7.800% due 5/15/27 2,182,500
340,478 Southwest Airlines Co., Series 1994-A3, 8.700% due 7/1/11 369,419
- ----------------------------------------------------------------------------------------------------
2,551,919
- ----------------------------------------------------------------------------------------------------
Utilities -- 1.2%
2,000,000 HNG Internorth, Inc., Notes, 9.625% due 3/15/06 2,395,000
2,000,000 WorldCom Inc., Notes, 7.750% due 4/1/07 2,122,500
- ----------------------------------------------------------------------------------------------------
4,517,500
- ----------------------------------------------------------------------------------------------------
Yankee -- 1.8%
2,000,000 ABN AMRO Bank NV Chicago, Sub. Notes,
7.550% due 6/28/06 2,127,500
2,500,000 Capital Desjardins, Inc., Sr. Notes, 7.370% due 8/8/05++ 2,606,250
2,000,000 Santander Financial Issuances, Guaranteed Sub. Notes,
7.250% due 5/30/06 2,070,000
- ----------------------------------------------------------------------------------------------------
6,803,750
- ----------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES
(Cost -- $44,152,133) 45,063,669
====================================================================================================
ASSET-BACKED SECURITIES -- 4.3%
5,000,000 Carco Auto Loan Master Trust, Series 1994-2,
7.875% due 7/15/99 5,027,650
550,969 Equity Credit Corp., Home Equity Loan Trust, Series 1993-3,
5.150% due 9/15/08 533,790
922,388 Fannie Mae Remic Pass Through Certificates, Series 1993-104,
5.500% due 3/25/98 918,662
Sears Credit Account Master Trust:
7,743,750 Series 1994-2A, 7.250% due 1/15/02 7,755,366
2,000,000 Series 1995-2A, 8.100% due 6/15/04 2,095,880
- ----------------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost -- $16,375,434) 16,331,348
====================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 13
<PAGE>
================================================================================
Schedule of Investments (unaudited)(continued) July 31, 1997
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
===============================================================================================
U.S. GOVERNMENT OBLIGATIONS -- 14.6%
<C> <S> <C>
$ 4,575,000 U.S. Treasury Notes, 7.375% due 11/15/97 $ 4,597,692
2,450,000 U.S. Treasury Notes, 5.375% due 11/30/97 2,448,898
750,000 U.S. Treasury Notes, 7.125% due 2/29/00 773,790
4,400,000 U.S. Treasury Notes, 6.250% due 8/31/00 4,454,824
2,000,000 U.S. Treasury Notes, 6.250% due 10/31/01 2,027,960
3,000,000 U.S. Treasury Notes, 5.875% due 11/30/01 2,999,100
1,900,000 U.S. Treasury Notes, 6.250% due 2/28/02 1,926,942
5,978,000 U.S. Treasury Notes, 6.375% due 8/15/02 6,105,152
2,000,000 U.S. Treasury Notes, 7.500% due 2/15/05 2,178,440
2,000,000 U.S. Treasury Notes, 6.875% due 5/15/06 2,110,940
3,000,000 U.S. Treasury Notes, 6.500% due 10/15/06 3,091,740
7,000,000 U.S. Treasury Bonds, 7.125% due 2/15/23 7,661,990
16,100,000 U.S. Treasury Bonds, 6.000% due 2/15/26 15,381,296
- -----------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost -- $53,731,474) 55,758,764
===============================================================================================
MORTGAGE-BACKED SECURITIES -- 6.1%
15,176 Federal Home Loan Mortgage Corp., 6.250% due 7/1/02 14,782
37,129 Federal Home Loan Mortgage Corp., 8.500% due 12/1/02 38,766
72,932 Federal National Mortgage Association, 5.500% due 3/1/99 69,970
3,216,289 Federal National Mortgage Association, 7.500% due 10/1/09 3,288,655
1,880,799 Federal National Mortgage Association, 6.000% due 2/1/11 1,843,183
126,582 Federal National Mortgage Association, 8.000% due 7/1/24 130,577
3,543,095 Federal National Mortgage Association, 7.500% due 5/1/25 3,605,100
4,777,097 Government National Mortgage Association, 7.500% due 2/15/26 4,863,659
9,579,991 Government National Mortgage Association, 6.500% due 4/15/26 9,421,251
- -----------------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost -- $22,477,128) 23,275,943
===============================================================================================
MUNICIPAL BONDS -- 0.3%
1,000,000 New Jersey EDA ST Pension, 7.425% due 2/15/29
(Cost -- $1,000,000) 1,073,850
===============================================================================================
REPURCHASE AGREEMENT -- 4.5%
17,421,000 Chase Manhattan Corp., 5.713% due 8/1/97;
Proceeds at maturity -- $17,423,764; (Fully collateralized
by U.S. Treasury Notes, 6.375% due 9/30/01;
Market value -- $17,769,715) (Cost -- $17,421,000) 17,421,000
===============================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $288,622,979*) $381,664,603
===============================================================================================
</TABLE>
+ Non-income producing security.
++ Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Statement of Assets and Liabilities (unaudited) July 31, 1997
================================================================================
ASSETS:
Investments, at value (Cost -- $288,622,979) $381,664,603
Cash 878
Interest receivable 2,513,194
Receivable for securities sold 9,649,065
Receivable for Fund shares sold 242,595
Dividends receivable 119,139
Other assets 3,676
- --------------------------------------------------------------------------------
Total Assets 394,193,150
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 6,260,856
Investment advisory fees payable 175,588
Distribution fees payable 81,694
Administration fees payable 63,851
Payable for Fund shares purchased 8,397
Accrued expenses 13,080
- --------------------------------------------------------------------------------
Total Liabilities 6,603,466
- --------------------------------------------------------------------------------
Total Net Assets $387,589,684
================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 17,587
Paid-in capital in excess of par value 265,046,838
Undistributed net investment income 699,147
Accumulated net realized gain from security
transactions and options 28,784,488
Net unrealized appreciation of investments 93,041,624
- --------------------------------------------------------------------------------
Total Net Assets $387,589,684
================================================================================
Shares Outstanding:
Class A 8,965,687
- --------------------------------------------------------------------------------
Class B 8,356,226
- --------------------------------------------------------------------------------
Class C 257,640
- --------------------------------------------------------------------------------
Class Y 7,380
- --------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 22.01
- --------------------------------------------------------------------------------
Class B* $ 22.07
- --------------------------------------------------------------------------------
Class C** $ 22.11
- --------------------------------------------------------------------------------
Class Y (and redemption price) $ 22.05
- --------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 5.26% of net asset value) $ 23.17
================================================================================
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if
shares are redeemed within one year from initial purchase (See Note 2).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if
shares are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 15
<PAGE>
================================================================================
Statement of Operations (unaudited) For the Six Months Ended July 31, 1997
================================================================================
INVESTMENT INCOME:
Interest $ 5,595,090
Dividends 1,578,100
Less: Foreign withholding tax (28,697)
- --------------------------------------------------------------------------------
Total Investment Income 7,144,493
- --------------------------------------------------------------------------------
EXPENSES:
Distribution fees (Note 2) 1,150,946
Investment advisory fees (Note 2) 999,977
Administration fees (Note 2) 363,628
Shareholder and system servicing fees 209,920
Shareholder communications 56,576
Registration fees 49,144
Audit and legal 25,566
Trustees' fees 9,333
Custody 8,719
Other 7,917
- --------------------------------------------------------------------------------
Total Expenses 2,881,726
- --------------------------------------------------------------------------------
Net Investment Income 4,262,767
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND OPTIONS (NOTES 3 AND 6):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) 18,924,203
Options purchased 534,875
Options written (402,625)
- --------------------------------------------------------------------------------
Net Realized Gain 19,056,453
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 64,480,761
End of period 93,041,624
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 28,560,863
- --------------------------------------------------------------------------------
Net Gain on Investments and Options 47,617,316
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $51,880,083
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Statement of Changes in Net Assets
================================================================================
For the Six Months Ended July 31, 1997 (unaudited)
and the Year Ended January 31, 1997
July 31 January 31
================================================================================
OPERATIONS:
Net investment income $ 4,262,767 $ 10,009,777
Net realized gain 19,056,453 29,798,572
Increase in net unrealized appreciation 28,560,863 4,059,203
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 51,880,083 43,867,552
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (4,613,154) (10,549,573)
Net realized gains -- (25,686,983)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions To Shareholders (4,613,154) (36,236,556)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 5):
Net proceeds from sale of shares 32,533,149 31,606,383
Net asset value of shares issued for
reinvestment of dividends 4,342,655 34,034,031
Cost of shares reacquired (81,364,700) (93,222,755)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (44,488,896) (27,582,341)
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 2,778,033 (19,951,345)
NET ASSETS:
Beginning of period 384,811,651 404,762,996
- --------------------------------------------------------------------------------
End of period* $387,589,684 $384,811,651
================================================================================
* Includes undistributed net investment income of: $ 699,147 $ 1,049,534
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 17
<PAGE>
================================================================================
Notes to Financial Statements (unaudited)
================================================================================
1. Significant Accounting Policies
The Smith Barney Concert Social Awareness Fund ("Fund"), a separate investment
fund of Smith Barney Equity Funds ("Trust"), a Massachusetts business trust, is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Trust consists of this
Fund and one other separate investment fund, the Smith Barney Growth and Income
Fund. The financial statements and financial highlights for the other fund are
presented in a separate semi-annual report.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities traded in
national securities markets are valued at the closing prices in the primary
exchange on which they are traded or, if there were no sales during the day, at
current quoted bid price; securities primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their re
spective exchanges, except that when a significant occurrence subsequent to the
time a value was so established is likely to have significantly changed the
value, then the fair value of those securities will be determined by
consideration of other factors by or under the direction of the Board of
Trustees or its delegates; over-the-counter securities and U.S. government
agency and obligations are valued at the mean between the bid and ask prices;
(c) securities maturing within 60 days are valued at cost plus accreted
discount, or minus amortized premium, which approximates value; (d) dividend
income is recorded on the ex-dividend date; foreign dividends are recorded on
the ex-dividend date or as soon as practical after the Fund determines the
existence of a dividend declaration after exercising reasonable due diligence;
(e) interest income is recorded on an accrual basis including the amortization
of premium and the accretion of discount, where applicable; (f) gains and losses
on the sale of securities are calculated by using the specific identification
method; (g) dividends and distributions to share holders are recorded on the
ex-dividend date; (h) the accounting records are maintained in U.S. dollars. All
assets and liabilities denominated in foreign currencies are translated into
U.S. dollars based on the rate of exchange of such currencies against U.S.
dollars on the date of valuation. Purchases and sales of securities, and income
and expenses are translated at the rate of exchange quoted on the respective
date that such transactions are recorded. Differences between income or expense
amounts recorded and collected or paid are adjusted when reported by the
custodian bank; (i) direct expenses are charged to each class; management fees
and general fund expenses are allocated on the basis of relative net assets; (j)
the Fund in tends to comply with the applicable provisions of the Internal
Revenue Code of 1986, as amended, pertaining to regulated investment companies
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes; (k) the character of income
and gains to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles; and
(l) estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ.
2. Investment Advisory Agreement, Administration Agreement and Other
Transactions
Smith Barney Strategy Advisors Inc. ("SBSA"), a subsidiary of Smith Barney
Mutual Funds Management Inc. ("SBMFM"), which, in turn, is a subsidiary of Smith
Barney Holdings Inc. ("SBH"), acts as investment adviser to the Fund. The Fund
pays SBSA an
- --------------------------------------------------------------------------------
18 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
investment advisory fee calculated at an annual rate of 0.55% of the average
daily net assets. This fee is calculated daily and paid monthly.
SBMFM also acts as the Trust's administrator for which the Fund pays a fee
calculated at an annual rate of 0.20% of the average daily net assets. This fee
is calculated daily and paid monthly.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of
Trust shares and primary broker for its portfolio agency transactions. For the
six months ended July 31, 1997, SB received sales charges of $154,000 on sales
of the Fund's Class A shares and brokerage commissions of $7,578.
There is a contingent deferred sales charge ("CDSC") of 5.00% on Class B shares,
which applies if redemption occurs within one year from initial purchase and
declines thereafter by 1.00% per year until no CDSC is incurred. Class C shares
have a 1.00% CDSC, which applies if redemption occurs within the first year of
purchase. For the six months ended July 31, 1997, CDSCs paid to SB for Class B
shares were approximately $167,000.
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to
Class A, B and C shares calculated at an annual rate of 0.25% of the average
daily net assets of each respective class. The Fund also pays a distribution fee
with respect to Class B and C shares calculated at an annual rate of 0.75% of
the average daily net assets for each class, respectively. For the six months
ended July 31, 1997, total Distribution Plan fees incurred were:
Class A Class B Class C
================================================================================
Distribution Plan Fees $222,965 $905,994 $21,987
================================================================================
All officers and one Trustee of the Trust are employees of SB.
3. Investments
During the six months ended July 31, 1997, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $119,202,786
- --------------------------------------------------------------------------------
Sales 139,938,137
================================================================================
At July 31, 1997, the aggregate gross unrealized appreciation and depreciation
of investments for Federal in come tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $ 93,466,156
Gross unrealized depreciation (424,532)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 93,041,624
================================================================================
4. Repurchase Agreements
The Fund purchases (and its custodian takes possession of) U.S. government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day),
at an agreed-upon higher repurchase price. The Fund requires continual
maintenance of the market value of the collateral in amounts at least equal to
the repurchase price.
5. Shares of Beneficial Interest
At July 31, 1997, the Trust had an unlimited number of shares of beneficial
interest authorized with a par value of $0.001 per share. The Fund has the
ability to issue multiple classes of shares. Each share of a class represents an
identical interest and has the same rights, except that each class bears certain
direct expenses, including those specifically related to the distribution of its
shares.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 19
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
At July 31, 1997, total paid-in capital amounted to the following for each
class:
Class A Class B Class C Class Y
================================================================================
Total Paid-in Capital $145,272,409 $114,958,160 $4,693,293 $140,563
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
July 31, 1997 January 31, 1997*
-------------------- -------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold 848,680 $ 16,772,297 765,757 $ 14,636,058
Shares issued on reinvestment 124,502 2,463,462 853,742 16,284,236
Shares redeemed (1,204,344) (23,800,674) (1,633,537) (31,295,560)
- -------------------------------------------------------------------------------------
Net Decrease (231,162) $ (4,564,915) (14,038) $ (375,266)
=====================================================================================
Class B
Shares sold 682,021 $ 13,621,590 794,793 $ 15,242,197
Shares issued on reinvestment 92,323 1,829,968 908,864 17,375,708
Shares redeemed (2,851,738) (56,446,064) (3,153,244) (60,500,586)
- -------------------------------------------------------------------------------------
Net Decrease (2,077,394) $(40,994,506) (1,449,587) $(27,882,681)
=====================================================================================
Class C
Shares sold 107,198 $ 2,139,262 78,020 $ 1,597,496
Shares issued on reinvestment 2,468 49,225 24,149 364,156
Shares redeemed (57,604) (1,117,962) (74,564) (1,426,609)
- -------------------------------------------------------------------------------------
Net Increase 52,062 $ 1,070,525 27,605 $ 535,043
=====================================================================================
Class Y
Shares sold -- -- 6,860 $ 130,632
Shares issued on reinvestment -- -- 520 9,931
Shares redeemed -- -- -- --
- -------------------------------------------------------------------------------------
Net Increase -- -- 7,380 $ 140,563
=====================================================================================
</TABLE>
* For Class Y shares, transactions are for the period from March 28, 1996
(inception date) to January 31, 1997.
6. Options Contracts
Premiums paid when put or call options are purchased by the Fund represent
investments, which are marked-to-market daily. When a purchased option expires,
the Fund will realize a loss in the amount of the premium paid. When the Fund
enters into a closing sales transaction, the Fund will realize a gain or loss
depending on whether the sales proceeds from the closing sales transaction are
greater or less than the premium paid for the option. When the Fund exercises a
put option, it will realize a gain or loss from the sale of the underlying
security and the proceeds from such sale will be decreased by the premium
originally paid. When the Fund exercises a call option, the cost of the security
which the Fund purchases upon exercise will be increased by the premium
originally paid.
At July 31, 1997, the Fund had no purchased put or call options.
- --------------------------------------------------------------------------------
20 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Notes to Financial Statements (unaudited) (continued)
================================================================================
When a Fund writes a covered call or put option, an amount equal to the premium
received by the Fund is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Fund realizes a gain
equal to the amount of the premium received. When the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss if the cost of the
closing purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is eliminated. When a written
call option is exercised, the cost of the security sold will be decreased by the
premium originally received. When a written put option is exercised, the amount
of the premium originally received will reduce the cost of the security which
the Fund purchased upon exercise. When a written index option is exercised,
settlement is made in cash.
The risk associated with purchasing options is limited to the premium originally
paid. The Fund enters into options for hedging purposes. The risk in writing a
covered call option is that the Fund gives up the opportunity to participate in
any increase in the price of the underlying security beyond the exercise price.
The risk in writing a put option is that the Fund is exposed to the risk of a
loss if the market price of the underlying security declines.
The following written call option transactions occurred during the six months
ended July 31, 1997:
Number of
Contracts Premium
================================================================================
Options written, outstanding at January 31, 1997 0 $ 0
Options written during the period ended July 31, 1997 1 1,290,875
Options cancelled in closing purchase transactions (1) (1,290,875)
Options expired 0 0
- --------------------------------------------------------------------------------
Options written, outstanding at July 31, 1997 0 $ 0
================================================================================
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 21
<PAGE>
================================================================================
Financial Highlights*
================================================================================
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class A Shares 1997(1) 1997 1996 1995 1994(2) 1993(3)
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 19.36 $ 19.00 $ 15.91 $ 17.72 $ 16.85 $ 16.80
- ----------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.28 0.57 0.61 0.57 0.52 0.13
Net realized and unrealized gain (loss) 2.66 1.71 3.52 (1.25) 2.37 0.88
- ----------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.94 42.28 4.13 (0.68) 2.89 1.01
- ----------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.29) (0.60) (0.52) (0.47) (0.56) (0.11)
Net realized gains -- (1.32) (0.52) (0.66) (1.46) (0.85)
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions (0.29) (1.92) (1.04) (1.13) (2.02) (0.96)
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 22.01 $ 19.36 $ 19.00 $ 15.91 $ 17.72 $ 16.85
- ----------------------------------------------------------------------------------------------------------------------
Total Return 15.36%++ 12.41% 26.47% (3.82)% 17.80% 6.12%++
- ----------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 197,314 $ 178,072 $ 175,007 $ 159,247 $ 6,216 $ 693
- ----------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.22%+ 1.28% 1.21% 1.33% 1.25% 1.25%+
Net investment income 2.72+ 2.98 3.10 2.89 2.85 3.61+
- ----------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 33% 68% 81% 103% 131% 93%
- ----------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(4) $ 0.06 $ 0.06 $ 0.06 -- -- --
======================================================================================================================
</TABLE>
(1) For the six months ended July 31, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(3) For the period from November 6, 1992 (inception date) to July 31, 1993.
(4) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
22 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class B Shares 1997(1) 1997 1996 1995 1994(2) 1993
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 19.42 $ 19.05 $ 15.97 $ 17.79 $ 16.84 $ 17.26
- ----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.21 0.43 0.49 0.39 0.38 0.51
Net realized and unrealized gain (loss) 2.66 1.71 3.53 (1.20) 2.37 1.06
- ----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.87 2.14 4.02 (0.81) 2.75 1.57
- ----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.22) (0.45) (0.42) (0.35) (0.34) (0.50)
Net realized gains -- (1.32) (0.52) (0.66) (1.46) (1.49)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.22) (1.77) (0.94) (1.01) (1.80) (1.99)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 22.07 $ 19.42 $ 19.05 $ 15.97 $ 17.79 $ 16.84
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return 14.89%++ 11.60% 25.58% (4.54)% 16.88% 9.68%
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 184,415 $ 202,597 $ 226,360 $ 216,035 $ 334,408 $ 287,983
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.97%+ 2.03% 1.94% 2.00% 1.98% 2.02%
Net investment income 1.98+ 2.23 2.37 2.21 2.11 2.84
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 33% 68% 81% 103% 131% 93%
- ----------------------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(3) $ 0.06 $ 0.06 $ 0.06 -- -- --
==================================================================================================================================
</TABLE>
(1) For the six months ended July 31, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(3) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 23
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class C Shares 1997(1) 1997 1996 1995(2) 1994(3)(4)
============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 19.46 $ 19.08 $ 15.97 $ 17.79 $ 17.54
- ------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.21 0.44 0.45 0.38 0.32
Net realized and unrealized gain (loss) 2.66 1.71 3.60 (1.19) 1.67
- ------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.87 2.15 4.05 (0.81) 1.99
- ------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.22) (0.45) (0.42) (0.35) (0.28)
Net realized gains -- (1.32) (0.52) (0.66) (1.46)
- ------------------------------------------------------------------------------------------------------------
Total Distributions (0.22) (1.77) (0.94) (1.01) (1.74)
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 22.11 $ 19.46 $ 19.08 $ 15.97 $ 17.79
- ------------------------------------------------------------------------------------------------------------
Total Return 14.87%++ 11.65% 25.77% (4.54)% 11.83%++
- ------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 5,697 $ 4,000 $ 3,396 $ 1,972 $ 399
- ------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.96%+ 2.01% 1.94% 1.98% 1.93%+
Net investment income 1.97+ 2.25 2.31 2.24 2.16+
- ------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 33% 68% 81% 103% 131%
- ------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(5) $ 0.06 $ 0.06 $ 0.06 -- --
============================================================================================================
</TABLE>
(1) For the six months ended July 31, 1997 (unaudited).
(2) On November 7, 1994, the former Class D shares were renamed Class C
shares.
(3) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(4) For the period from May 5, 1993 (inception date) to July 31, 1994.
(5) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
24 1997 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of beneficial interest outstanding throughout each
period:
Class Y Shares 1997(1) 1997(2)
================================================================================
Net Asset Value, Beginning of Period $ 19.39 $ 19.00
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.31 0.51
Net realized and unrealized gain 2.67 1.69
- --------------------------------------------------------------------------------
Total Income From Operations 2.98 2.20
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.32) (0.49)
Net realized gains -- (1.32)
- --------------------------------------------------------------------------------
Total Distributions (0.32) (1.81)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $ 22.05 $ 19.39
- --------------------------------------------------------------------------------
Total Return++ 15.55% 11.94%
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 163 $ 143
- --------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 0.87% 0.90%
Net investment income 3.06 3.31
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 33% 68%
- --------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions $ 0.06 $ 0.06
================================================================================
(1) For the six months ended July 31, 1997 (unaudited).
(2) For the period from March 28, 1996 (inception date) to July 31, 1997.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 25
<PAGE>
Concert Social
Awareness Fund
Trustees
Lee Abraham
Allan J. Bloostein
Richard E. Hanson, Jr.
Heath B. McLendon, Chairman
Officers
Heath B. McLendon
Chief Executive Officer
Lewis E. Daidone
Senior Vice President and Treasurer
Robert J. Brady, CFA
Investment Officer
Ellen S. Cammer
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Adviser
Smith Barney Strategy Advisers Inc.
Administrator
Smith Barney Mutual Funds Management Inc.
Distributor
Smith Barney Inc.
Custodian
PNC Bank, N.A.
Shareholder Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is for the information of shareholders of Concert Social Awareness
Fund, but it may also be used as sales literature when preceded or accompanied
by the current prospectus, which gives details about charges, expenses,
investment objectives and operating policies of the Fund. If used as sales
material after September 30, 1997, this report must be accompanied by
performance information for the most recently completed calendar quarter.
[recycling symbol]
Because we care about the environment, this semi-annual report has been printed
with soy-based inks on 50% post-consumer recycled paper, deinked using a
non-chlorine bleach process.
[SMITH BARNEY LOGO]
Concert Social Awareness Fund
Smith Barney Mutual Funds
388 Greenwich Street
New York, New York 10013
FD0423 9/97
[GRAPHIC OMITTED]
Smith Barney
Growth and
[GRAPHIC OMITTED] Income Fund
------------------
SEMI-ANNUAL REPORT
------------------
July 31, 1997
[LOGO] Smith Barney Mutual Funds
Investing for your future
Every day(sm).
<PAGE>
Smith Barney
Growth and Income Fund
================================================================================
The Smith Barney Growth and Income Fund seeks long-term capital growth and
income by investing in income-producing stocks, including dividend-paying common
stocks and securities that are convertible into common stocks and warrants. The
Fund's management uses investment criteria designed to identify companies with
consistent dividend paying histories, relatively high levels of dividends, the
capacity to raise dividends in the future and the potential for capital
appreciation.
Smith Barney Growth and Income Fund's
Average Annual Total Returns Ended
July 31, 1997
Without Sales Charges*
------------------------------
Class A Class B Class C
================================================
Six-Month+ 17.50% 17.11% 17.18%
- ------------------------------------------------
One-Year 38.74 38.07 38.15
- ------------------------------------------------
Since Inception++ 15.72 15.14 22.57
- ------------------------------------------------
With Sales Charges**
------------------------------
Class A Class B Class C
================================================
Six-Month+ 11.65% 12.11% 16.18%
- ------------------------------------------------
One-Year 31.81 33.07 37.15
- ------------------------------------------------
Since Inception++ 14.48 15.02 22.57
- ------------------------------------------------
* Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
** Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 5.00%; and Class B shares reflect
the deduction of a 5.00% CDSC, which applies if shares are redeemed within
one year from initial purchase and declines thereafter by 1.00% per year
until no CDSC is incurred. Class C shares reflect the deduction of a 1.00%
CDSC, which applies if shares are re deemed within the first year of
purchase.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
++ Inception dates for Class A, B, and C shares are November 6, 1992,
November 6, 1992 and August 15, 1994, respectively.
- --------------------------------------------------------------------------------
OUR INVESTMENT PHILOSOPHY
- --------------------------------------------------------------------------------
At Smith Barney Mutual Funds, your investment needs come first. Our goal is to
deliver consistent and competitive returns over time, using a wide range of
investment strategies.
- --------------------------------------------------------------------------------
NASDAQ SYMBOL
- --------------------------------------------------------------------------------
Class A SGIAX
Class B SGIBX
- --------------------------------------------------------------------------------
WHAT'S INSIDE
- --------------------------------------------------------------------------------
Shareholder Letter.........................1
An Interview with Portfolio Manager
R. Jay Gerken, CFA.........................4
Historical Performance.....................5
Smith Barney Growth and Income Fund
at a Glance................................7
Schedule of Investments................... 8
Statement of Assets and Liabilities.......11
Statement of Operations...................12
Statements of Changes in Net Assets.......13
Notes to Financial Statements.............14
Financial Highlights......................18
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
[PHOTO] [PHOTO]
Heath B. McLendon R. Jay Gerken, CFA
Chairman Vice President and
Investment Officer
Dear Shareholder:
We are pleased to provide the semi-annual report for the Smith Barney Growth and
Income Fund for the period ended July 31, 1997. For your convenience, we have
outlined the investment strategy of the Fund and its current portfolio strategy.
A detailed summary of performance and current holdings of the Fund can be found
in the appropriate sections that follow. In addition, an interview with R. Jay
Gerken, CFA, the Fund's Portfolio Manager, appears on page four.
Performance and Market Update
For the six months ended July 31, 1997, the Class A shares of the Smith Barney
Growth and Income Fund generated a total return of 17.50%, trailing its Lipper
Analytical Services, Inc. peer group average total return of 18.90%. (Lipper is
a major fund-tracking organization.)
The Smith Barney Growth and Income Fund has a conservative stock selection
approach, given its focus on quality companies with rising dividends. In
addition, stock prices have risen so sharply in the last six months that even
the modest amounts of cash and intermediate bonds in the Fund have penalized
performance. Over time, however, we believe that a conservative stock selection
technique and modest amounts of fixed income securities should prove to be
beneficial to shareholders.
The Nirvana Economy
The markets have rewarded investors with a good year's performance over the six
months ended July 31, 1997. The U.S. stock market returns were outstanding, with
returns almost equal to those for the previous twelve months. Bond market
returns, while more modest, actually exceeded last year's returns.
What drove these better than average numbers? An economy that has been described
as somewhere between perfection and nirvana. Economic growth slowed to a 3.6%
rate in the second quarter after stronger Gross Domestic Product ("GDP") growth
in the previous two quarters. Inflation was contained, with the Consumer Price
Index ("CPI") growing a mere 0.8% between January and July. And corporate
earnings continued to surprise many analysts.
It wasn't clear at the beginning of the period that things were going to turn
out so swimmingly. The Federal Reserve Board ("Fed") raised interest rates at
its March meeting, triggering a swoon in stock and bond prices. But, shortly
thereafter it became clear that the economy was slowing, so that the Fed seemed
unlikely to raise rates again in the near future.
The Fed's move last March to increase interest rates was due to two strong
quarters of over 4% growth, in the fourth quarter of 1996 and the first quarter
of 1997. The Fed reacted at least in part to a "growth scare," a fear that the
economy was growing too quickly and that inflation might be reignited. The Fed's
previous move, however, had been to lower interest rates. In January 1996 the
Fed reacted to a different set of economic statistics, ones that indicated that
the economy was growing too slowly. One could call this a "slowdown fear." By
skillfully navigating between growth scares and slowdown fears, the Fed has
helped engineer one of the longest postwar
- --------------------------------------------------------------------------------
Smith Barney Growth and Income Fund 1
<PAGE>
economic expansions. It is now more than six years since the last economic
recession.
So the U.S. economy has been nothing short of amazing. This is one of the
reasons that in our last letter to you we maintained that "it's different this
time." We believe that this long economic expansion would not have been possible
without the Fed's skillful navigation; we also believe that it would not have
been possible without changes in technology and world trade.
Companies have made accelerated investments in technology over the last decade.
It now appears that these investments are finally paying off in increased
productivity. This higher productivity has not yet been fully captured in
government statistics, however, as the official numbers have a difficult time
capturing the improvements in the service side of the economy. Instead, this
increased efficiency has shown up most completely in earnings reports. Companies
are surprising investors with their rates of profit growth and margin increases,
attesting to corporations' success in realizing the benefits of their technology
investments.
But the changes in world trade may be even more profound than progress in
technology. The end of the cold war has opened up vast areas of the world. New
markets are available for the sale of goods and services. New sources of labor
are available: plentiful, educated and inexpensive. Almost every country in the
world is welcoming capital investment, including some that are still nominally
Communist governments.
These technological and trade forces have had two beneficial results: low
inflation and strong corporate profits. Inflation is low as measured by the CPI.
As noted, it ran just 0.8% over the last six months -- a 1.6% annual rate. And
as we wrote in a previous letter, we believe that the CPI actually overstates
inflation, perhaps by as much as 2%. If we are right, "true" inflation was
actually below zero -- so we actually had a mild instance of deflation over the
last six months.
Some have voiced fears that low inflation, let alone deflation, might prove
negative for corporate profits. This has not been the case. In the latest
quarter, over 60% of the companies in the S&P 500 reported earnings ahead of
analysts' expectations. Analysts have miscalculated the benefits of corporate
investments in technology. They have also missed the benefits of increased sales
and cheaper sources for goods and labor in the international marketplace.
Perhaps nirvana is an economic overstatement, for not everyone has shared in its
benefits. But the economy has been on a wonderful roll. And as long as the
fundamentals of reasonable growth, low inflation and strong corporate earnings
stay in place, we anticipate that the stock and bond markets will remain
attractive for long-term investors.
Portfolio Update
Stocks sold out of the Fund over the last six months included Circuit City, John
H. Harland, Union Pacific Resources and Conrail. We sold Circuit City as
competition heated up in consumer electronics. John H. Harland, which cut its
dividend, and Union Pacific Resources, a spin-off from Union Pacific Corp., no
longer fit our long-term investment criteria. Conrail was the subject of a long
bidding war between CSX and Norfolk Southern. The competition was resolved by
having the two companies agree to jointly tender for Conrail's shares.
Recent purchases include Chase Manhattan Corp., Starwood Lodging Trust, Rite Aid
and Colgate Palmolive. As consolidation continues, we believe that Chase will be
one of a select group of large money center and superregional banks best
positioned to weather the challenges of an increasingly competitive financial
services industry. To complement our positions in two California office real
estate investment trusts (REITs), we have added Starwood Lodging, a national
full-service hotel REIT. Starwood is one of only four hotel REITs entitled to
maintain its paired-share status, which are REIT shares that are paired with the
operating management entity, enabling the REIT to benefit from both ownership
and self-
- --------------------------------------------------------------------------------
2 1997 Semi-Annual Report to Shareholders
<PAGE>
management of its hotel properties. This in turn can yield substantial cost
savings. Rite Aid, a national drugstore chain, has been successfully
implementing a new store prototype in its core operations and is revamping
operations at its recently purchased Thrifty-Payless unit. Both initiatives are
expanding margins. Colgate, a leading personal care products company, has been
aggressive in new product development and is now reaping the benefits of its
cost-restructuring program.
On a more somber note, we are saddened by the loss of two outstanding business
leaders and Trustees of the Fund, Antoinette C. Bentley and Madelon DeVoe
Talley.
Their knowledge and wisdom will be missed.
Thank you for your investment in the Smith Barney Growth and Income Fund. We
look forward to continuing to help you pursue your long-term financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ R. Jay Gerken, CFA
Heath B. McLendon R. Jay Gerken, CFA
Chairman Vice President and
Investment Officer
August 18, 1997
- --------------------------------------------------------------------------------
Top Ten Holdings* As of July 31, 1997
- --------------------------------------------------------------------------------
1.Hewlett-Packard Co. 4.2%
- -------------------------------------------------------------------------------
2.General Electric Co. 3.5
- -------------------------------------------------------------------------------
3.Monsanto Co. 2.8
- -------------------------------------------------------------------------------
4.NationsBank Corp. 2.8
- -------------------------------------------------------------------------------
5.Coca-Cola Co. 2.7
- -------------------------------------------------------------------------------
6.Eli Lilly & Co. 2.5
- -------------------------------------------------------------------------------
7.AMP, Inc. 2.2
- -------------------------------------------------------------------------------
8.Johnson & Johnson 2.2
- -------------------------------------------------------------------------------
9.LM Ericsson Telephone Co. ADR 2.2
- -------------------------------------------------------------------------------
10.Motorola, Inc. 2.2
- -------------------------------------------------------------------------------
* As a percentage of total stocks.
- --------------------------------------------------------------------------------
Smith Barney Growth and Income Fund 3
<PAGE>
- --------------------------------------------------------------------------------
An Interview with Portfolio Manager
R. Jay Gerken, CFA
- --------------------------------------------------------------------------------
R. Jay Gerken, CFA, has over seventeen years of Wall Street experience and is a
Managing Director of Smith Barney. Mr. Gerken holds a B.A. in history from Brown
University and an M.B.A. from Harvard University. He is currently responsible
for managing more than $400 million in mutual fund assets for Smith Barney.
Jay, could you provide some perspective on the recent performance of the
financial markets? How are events in the financial marketplace affecting the
average investor?
Jay: The big story, of course, is the historic climb of the U.S. stock market.
As most investors know, large-cap stocks have been roaring ahead. For the most
part that's very good news, because almost all of us benefit from a bull market.
But unfortunately, many investors may be getting a somewhat warped view of the
markets. The perception right now is that, "as long as I own large-cap U.S.
stocks, I'm going to make a lot of money."
What would you say to investors who believe that the large-cap stock rally will
never end?
Jay: There are two misconceptions at work here. One is that large-cap U.S.
stocks will continue moving up in a straight line forever. Obviously that isn't
going to happen. The second is that large-cap U.S. stocks will continue to
outperform all other investment options year after year. Even if the Standard &
Poor's 500 continues to do well -- and we have a generally positive outlook at
Smith Barney -- there are many other sectors that are poised to do even better.
Those sectors include small-cap stocks, international stocks and other asset
classes.
In other words, most investors would be well advised to keep a portion of their
portfolio in blue-chip stocks, but not ignore the other asset classes?
Jay: That's right. Since the first quarter of 1995,
investors have been rewarded for failing to diversify, for staying with the
best-performing asset class -- large-cap domestic stocks -- and more or less
ignoring all other options. When investors have done this in the past, the
consequences have been rather unpleasant. We are a little concerned that the
lessons of history are being lost in stock market euphoria.
Jay, some investors still believe they can predict the market. In fact,
well-known market gurus and observers continue to have large and dedicated
followings.
Jay: We don't know anyone who can consistently predict which asset class is
going to be hot and which is going to be cold. Mind you, there's no shortage of
self-proclaimed experts who claim they can do this, and they'll be happy to
share that information with you in a newsletter that costs $69.95 per year. But
if these folks are so smart, you have to wonder why they're chasing checks for
$69.95 instead of just tending to their own fortunes.
Jay, how would you describe the Growth and Income Fund's investment strategy?
Jay: We apply quantitative and fundamental research when selecting securities
for the portfolio. We manage a classic growth and income fund, which means we
only buy stocks that pay dividends on a consistent basis. We tend to favor the
stocks of quality or "blue-chip" companies with strong balance sheets, excellent
management teams and promising product lines. We believe dividends are an
excellent way to gauge whether a company's management is committed to
shareholders.
The Smith Barney Growth and Income Fund is an ideal vehicle for investors
looking for a conservative way to invest in the stock market. By investing in
established companies with a history of increasing dividends, the Growth and
Income Fund offers attractive total return potential with typically less market
volatility than the broad market averages.
Thank you very much, Jay.
- --------------------------------------------------------------------------------
4 1997 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
==========================================================================================
<C> <C> <C> <C> <C> <C>
7/31/97 $14.30 $16.69 $0.10 $0.00 17.50%+
- ------------------------------------------------------------------------------------------
1/31/97 12.16 14.30 0.20 0.18 20.97
- ------------------------------------------------------------------------------------------
1/31/96 9.62 12.16 0.20 0.20 30.97
- ------------------------------------------------------------------------------------------
1/31/95 10.36 9.62 0.19 0.14 (3.93)
- ------------------------------------------------------------------------------------------
1/31/94 9.58 10.36 0.23 0.00 10.70
- ------------------------------------------------------------------------------------------
Inception*-- 1/31/93 9.50 9.58 0.00 0.00 0.84+
==========================================================================================
Total $0.92 $0.52
==========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
==========================================================================================
<C> <C> <C> <C> <C> <C>
7/31/97 $14.33 $16.70 $0.07 $0.00 17.11%+
- ------------------------------------------------------------------------------------------
1/31/97 12.19 14.33 0.15 0.18 20.43
- ------------------------------------------------------------------------------------------
1/31/96 9.65 12.19 0.15 0.20 30.23
- ------------------------------------------------------------------------------------------
1/31/95 10.38 9.65 0.14 0.14 (4.33)
- ------------------------------------------------------------------------------------------
1/31/94 9.58 10.38 0.15 0.00 10.01
- ------------------------------------------------------------------------------------------
Inception*-- 1/31/93 9.50 9.58 0.00 0.00 0.84+
==========================================================================================
Total $0.66 $0.52
==========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
==========================================================================================
<C> <C> <C> <C> <C> <C>
7/31/97 $14.33 $16.71 $0.07 $0.00 17.18%+
- ------------------------------------------------------------------------------------------
1/31/97 12.19 14.33 0.15 0.18 20.43
- ------------------------------------------------------------------------------------------
1/31/96 9.65 12.19 0.15 0.20 30.23
- ------------------------------------------------------------------------------------------
Inception* -- 1/31/95 9.91 9.65 0.06 0.14 (0.58)+
==========================================================================================
Total $0.43 $0.52
==========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Growth and Income Fund 5
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance -- Class Y Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
==========================================================================================
<C> <C> <C> <C> <C> <C>
7/31/97 $14.34 $16.71 $0.14 $0.00 17.68%+
- ------------------------------------------------------------------------------------------
1/31/97 12.16 14.34 0.22 0.18 21.48
- ------------------------------------------------------------------------------------------
Inception* -- 1/31/96 12.08 12.16 0.00 0.00 N/A**
==========================================================================================
Total $0.36 $0.18
==========================================================================================
</TABLE>
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
-------------------------------------------------
Class A Class B Class C Class Y
================================================================================
Six Months Ended 7/31/97+ 17.50% 17.11% 17.18% 17.68%
- --------------------------------------------------------------------------------
Year Ended 7/31/97 38.74 38.07 38.15 39.33
- --------------------------------------------------------------------------------
Inception* through 7/31/97 15.72 15.14 22.57 27.44
================================================================================
With Sales Charge(1)
-------------------------------------------------
Class A Class B Class C Class Y
================================================================================
Six Months Ended 7/31/97+ 11.65% 12.11% 16.18% 17.68%
- --------------------------------------------------------------------------------
Year Ended 7/31/97 31.81 33.07 37.15 39.33
- --------------------------------------------------------------------------------
Inception* through 7/31/97 14.48 15.02 22.57 27.44
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 7/31/97) 99.65%
- --------------------------------------------------------------------------------
Class B (Inception* through 7/31/97) 94.94
- --------------------------------------------------------------------------------
Class C (Inception* through 7/31/97) 82.70
- --------------------------------------------------------------------------------
Class Y (Inception* through 7/31/97) 43.91
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and C
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 5.00% and Class B shares reflect
the deduction of a 5.00% CDSC, which applies if shares are redeemed within
one year from initial purchase and declines thereafter by 1.00% per year
until no CDSC occurs. Class C shares reflect the deduction of a 1.00%
CDSC, which applies if shares are redeemed within the first year of
purchase.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception dates for Class A, B, C and Y shares are November 6, 1992,
November 6, 1992, August 15, 1994 and January 31, 1996, respectively.
** Information is not meaningful since the class was only open for one day.
- --------------------------------------------------------------------------------
6 1997 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Smith Barney Growth and Income Fund at a Glance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A and B Shares of the Smith Barney Growth
and Income Fund vs. Standard &Poor's 500 Index+
- --------------------------------------------------------------------------------
November 1992 -- July 1997
[GRAPHIC OMITTED]
[The following table was presented as a line graph in the printed materials.]
Smith Barney Growth and
Income Fund -- Class A Shares
Smith Barney Growth and
Income Fund -- Class B Shares
Standard & Poor's 500 Index
SB G&I. Class A SB G&I. Class B S&P
--------------- --------------- -----
Nov 1992 9500 10000 10000
Jan 1993 9580 10084 10554
Jan 1994 10605 11094 11910
Jan 1995 10188 10614 11973
Jan 1996 13344 13822 16596
Jan 1997 16142 16646 20965
July 1997 18967 19494 25691
+ Hypothetical illustration of $10,000 invested in Class A and B shares at
inception on November 6, 1992, assuming deduction of the maximum 5.00%
sales charge at the time of investment for Class A shares and the
deduction of the maximum 5.00% CDSC for Class B shares. It also assumes
reinvestment of dividends and capital gains, if any, at net asset value
through July 31, 1997. The Standard & Poor's 500 Index is composed of 500
widely held common stocks listed on the New York Stock Ex change, American
Stock Exchange and over-the-counter market. The index is unmanaged and is
not subject to the same management and trading expenses as a mutual fund.
The performance of the Fund's other classes may be greater or less than
the Class A and B shares' performance indicated on this chart, depending
on whether greater or lesser sales charges and fees were incurred by
shareholders investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No
adjustment has been made for shareholder tax liability on dividends or
capital gains.
Industry Diversification*
- --------------------------------------------------------------------------------
[The following table was presented as a line graph in the printed materials.]
9.7% Banks
9.8% Consumer Non-Durables
11.5% Electronic Technology
6.0% Energy
5.0% Finance
6.7% Health Technology
8.6% Process Industries
7.3% Producer Manufacturer
4.9% Retail
5.6% Utilities
24.9% Other
* As a percentage of total stocks.
Investment Breakdown
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
[The following table was presented as a pie chart in the printed materials.]
2.8% Corporate Debentures
4.2% Repurchase Agreement
93.0% Stocks
- --------------------------------------------------------------------------------
Smith Barney Growth and Income Fund 7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) July 31, 1997
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
STOCKS -- 93.0%
Banks -- 9.1%
65,000 Chase Manhattan Corp. $ 7,381,563
60,000 J.P. Morgan & Co., Inc. 6,952,500
130,000 Keycorp 8,084,375
160,000 NationsBank Corp. 11,390,000
100,000 State Street Boston Corp. 5,606,250
- --------------------------------------------------------------------------------
39,414,688
- --------------------------------------------------------------------------------
Commercial Services -- 2.8%
65,000 Reuters Holdings PLC ADR 4,200,625
85,000 W. W. Grainger, Inc. 8,160,000
- --------------------------------------------------------------------------------
12,360,625
- --------------------------------------------------------------------------------
Consumer Durables -- 4.0%
200,000 Chrysler Corp. 7,425,000
150,000 Genuine Parts Co. 4,893,750
110,000 Leggett & Platt, Inc. 4,991,250
- --------------------------------------------------------------------------------
17,310,000
- --------------------------------------------------------------------------------
Consumer Non-Durables -- 9.1%
160,000 Coca-Cola Co. 11,080,000
100,000 Colgate-Palmolive Co. 7,575,000
120,000 Kimberly-Clark Corp. 6,082,500
150,000 Liz Claiborne Inc. 7,181,250
50,000 Procter & Gamble Co. 7,606,250
- --------------------------------------------------------------------------------
39,525,000
- --------------------------------------------------------------------------------
Consumer Services -- 3.7%
85,000 McDonald's Corp. 4,568,750
12,000 TCA Cable Television, Inc. 4,530,000
85,000 Walt Disney Co. 6,869,063
- --------------------------------------------------------------------------------
15,967,813
- --------------------------------------------------------------------------------
Electronic Technology -- 10.7%
170,000 AMP, Inc. 8,882,500
32,000 Harris Corp. 2,780,000
240,000 Hewlett-Packard Co. 16,815,000
200,000 LM Ericsson Telephone Co. ADR 9,050,000
110,000 Motorola, Inc. 8,834,375
- --------------------------------------------------------------------------------
46,361,875
- --------------------------------------------------------------------------------
Energy -- 5.5%
130,000 Exxon Corp. 8,352,500
90,000 Mobil Corp. 6,885,000
100,000 Phillips Petroleum Co. 4,606,250
72,540 Unocal Corp., Convertible Preferred 4,234,523
- --------------------------------------------------------------------------------
24,078,273
- --------------------------------------------------------------------------------
Finance -- 4.7%
90,000 Beneficial Corp. 6,525,000
85,000 Greenpoint Financial Corp. 5,599,375
105,000 Mercury General Corp. 8,137,500
- --------------------------------------------------------------------------------
20,261,875
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1997 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) July 31, 1997
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Health Technology -- 6.3%
90,000 Eli Lilly & Co. $10,170,000
140,000 Johnson & Johnson 8,723,750
80,000 Merck & Co. 8,315,000
- --------------------------------------------------------------------------------
27,208,750
- --------------------------------------------------------------------------------
Industrial Services -- 1.5%
110,000 Fluor Corp. 6,765,000
- --------------------------------------------------------------------------------
Minerals -- 2.2%
378,869 Broken Hill Proprietary Co. 5,149,072
225,000 Worthington Industries, Inc. 4,457,813
- --------------------------------------------------------------------------------
9,606,885
- --------------------------------------------------------------------------------
Process Industries -- 8.0%
100,000 Bemis, Inc. 4,593,750
150,000 M.A. Hanna Co. 3,956,250
225,000 Monsanto Co. 11,207,813
275,000 Pall Corp. 6,909,375
120,000 Temple-Inland Inc. 8,077,500
- --------------------------------------------------------------------------------
34,744,688
- --------------------------------------------------------------------------------
Producer Manufacturer -- 6.8%
41,000 Belden, Inc. 1,588,750
45,000 Dana Corp. 2,044,688
200,000 General Electric Co. 14,037,500
90,000 Hubbell, Inc., Class B Shares 4,280,625
80,000 Minnesota Mining & Manufacturing Co. 7,580,000
- --------------------------------------------------------------------------------
29,531,563
- --------------------------------------------------------------------------------
Real Estate -- 3.1%
130,000 Arden Realty, Inc. 3,534,375
63,000 Equity Office Property 1,827,000
130,000 Kilroy Realty Corp. 3,266,250
100,000 Starwood Lodging Trust 4,662,500
- --------------------------------------------------------------------------------
13,290,125
- --------------------------------------------------------------------------------
Retail -- 4.5%
75,000 May Department Stores Co. 4,190,625
140,000 Nordstrom, Inc. 7,936,250
145,000 Rite Aid Corp. 7,530,935
- --------------------------------------------------------------------------------
19,657,810
- --------------------------------------------------------------------------------
Technology Services -- 3.3%
150,000 Automatic Data Processing Inc. 7,425,000
165,000 Electronic Data Systems 7,136,250
- --------------------------------------------------------------------------------
14,561,250
- --------------------------------------------------------------------------------
Transportation -- 2.5%
160,000 Knightsbridge Tankers Ltd. 4,420,000
90,000 Union Pacific Corp. 6,451,875
- --------------------------------------------------------------------------------
10,871,875
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Growth and Income Fund 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) July 31, 1997
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Utilities -- 5.2%
90,000 Ameritech Corp. $ 6,069,375
100,000 Bellsouth Corp. 4,737,500
135,000 Duke Power Co. 6,842,813
110,000 GTE Corp. 5,115,000
- --------------------------------------------------------------------------------
22,764,688
- --------------------------------------------------------------------------------
TOTAL STOCKS
(Cost-- $248,403,535) 404,282,783
================================================================================
Face
Amount SECURITY VALUE
================================================================================
CORPORATE DEBENTURES -- 2.8%
Financial Services -- 1.9%
$ 4,000,000 Dean Witter Discover & Co., 6.875% due 3/1/03 4,065,000
4,000,000 General Motors Acceptance Corp., 7.000% due 9/15/02 4,115,000
- --------------------------------------------------------------------------------
8,180,000
- --------------------------------------------------------------------------------
Retail Trade -- 0.9%
4,000,000 Limited Inc., 7.800% due 5/15/02 4,150,000
- --------------------------------------------------------------------------------
TOTAL CORPORATE DEBENTURES
(Cost-- $11,858,940) 12,330,000
================================================================================
REPURCHASE AGREEMENT-- 4.2%
18,115,000 Goldman, Sachs & Co., 5.730% due 8/1/97; Proceeds
at maturity -- $18,117,883; (Fully collateralized
by U.S. Treasury Notes, 6.250% due 6/30/98;
Market value -- $18,486,095) (Cost -- $18,115,000) 18,115,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $278,377,475*) $434,727,783
================================================================================
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1997 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) July 31, 1997
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost-- $278,377,475) $ 434,727,783
Cash 41,287
Dividends and interest receivable 677,740
Receivable for Fund shares sold 571,965
Deferred organization costs 9,614
- --------------------------------------------------------------------------------
Total Assets 436,028,389
- --------------------------------------------------------------------------------
LIABILITIES:
Investment advisory fees payable 157,938
Distribution fees payable 57,462
Administration fees payable 70,194
Accrued expenses 38,161
- --------------------------------------------------------------------------------
Total Liabilities 323,755
- --------------------------------------------------------------------------------
Total Net Assets $ 435,704,634
================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 26,088
Capital paid in excess of par value 271,954,228
Overdistributed net investment income (362,418)
Accumulated net realized gain from security transactions 7,736,428
Net unrealized appreciation of investments 156,350,308
- --------------------------------------------------------------------------------
Total Net Assets $ 435,704,634
================================================================================
Shares Outstanding:
Class A 9,350,611
-----------------------------------------------------------------------------
Class B 9,485,623
-----------------------------------------------------------------------------
Class C 273,866
-----------------------------------------------------------------------------
Class Y 6,978,329
-----------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $16.69
-----------------------------------------------------------------------------
Class B* $16.70
-----------------------------------------------------------------------------
Class C** $16.71
-----------------------------------------------------------------------------
Class Y (and redemption price) $16.71
-----------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 5.26% of net asset value per share) $17.57
================================================================================
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if shares
are redeemed within one year from initial purchase (See Note 2).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Growth and Income Fund 11
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited) For the Six Months Ended July 31, 1997
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 3,782,602
Interest 890,386
Less: Foreign withholding tax (20,393)
- --------------------------------------------------------------------------------
Total Investment Income 4,652,595
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2) 839,937
Distribution fees (Note 2) 709,705
Administration fees (Note 2) 373,305
Shareholder and system servicing fees 168,804
Registration fees 45,678
Shareholder communications 30,559
Amortization of deferred organization costs 19,235
Audit and legal 18,315
Trustees' fees 12,364
Custody 4,748
Other 987
- --------------------------------------------------------------------------------
Total Expenses 2,223,637
- --------------------------------------------------------------------------------
Net Investment Income 2,428,958
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE3):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 20,036,620
Cost of securities sold 14,420,365
- --------------------------------------------------------------------------------
Net Realized Gain 5,616,255
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 100,511,435
End of period 156,350,308
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 55,838,873
- --------------------------------------------------------------------------------
Net Gain on Investments 61,455,128
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 63,884,086
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1997 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended July 31, 1997 (unaudited)
and the Year Ended January 31, 1997
July 31 January 31
================================================================================
OPERATIONS:
Net investment income $ 2,428,958 $ 3,610,084
Net realized gain 5,616,255 6,026,402
Increase in net unrealized appreciation 55,838,873 45,724,984
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 63,884,086 55,361,470
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (2,572,301) (3,848,619)
Net realized gains -- (4,202,531)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (2,572,301) (8,051,150)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 52,453,000 128,069,584
Net asset value of shares issued for
reinvestment of dividends 1,485,918 6,071,405
Cost of shares reacquired (31,155,602) (53,788,201)
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 22,783,316 80,352,788
- --------------------------------------------------------------------------------
Increase in Net Assets 84,095,101 127,663,108
NET ASSETS:
Beginning of period 351,609,533 223,946,425
- --------------------------------------------------------------------------------
End of period* $435,704,634 $351,609,533
================================================================================
* Includes overdistributed net investment income of: $(362,418) $(219,075)
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Growth and Income Fund 13
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Smith Barney Growth and Income Fund ("Fund"), a separate investment fund of
the Smith Barney Equity Funds ("Trust"), a Massachusetts business trust, is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Trust consists of this
Fund and one other separate investment fund, Concert Social Awareness Fund. The
financial statements and financial highlights for the other fund are presented
in a separate semi-annual report.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities traded on
national securities markets are valued at the closing prices on such markets;
securities for which no sales price were reported and U.S. government agencies
and obligations are valued at current quoted bid prices; (c) securities that
have a maturity of more than 60 days are valued at prices based on market
quotations for securities of similar type, yield and maturity; (d) securities
maturing within 60 days are valued at cost plus accreted discount, or minus
amortized premium, as applicable; (e) dividend income is recorded on the
ex-dividend date and interest income is recorded on an accrual basis; (f) gains
or losses on the sale of securities are calculated by using the specific
identification method; (g) dividends and distributions to share holders are
recorded on the ex-dividend date; (h) the accounting records are maintained in
U.S. dollars. All assets and liabilities denominated in foreign currencies are
translated into U.S. dollars based on the rate of exchange of such currencies
against U.S. dollars on the date of valuation. Purchases and sales of
securities, and income and expenses are translated at the rate of exchange
quoted on the respective date that such transactions are recorded. Differences
between income or expense amounts recorded and collected or paid are adjusted
when reported by the custodian bank; (i) direct expenses are charged to each
class; management fees and general fund expenses are allocated on the basis of
relative net assets; (j) the Fund intends to comply with the applicable
provisions of the Internal Revenue Code of 1986, as amended, pertaining to
regulated investment companies and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes;
(k) the character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications were made to the Fund's capital
accounts to reflect permanent book/tax differences and income and gains
available for distributions under income tax regulations; and (l) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.
In addition, organization costs have been deferred and are being amortized on a
straight line basis over a five-year period, beginning with the commencement of
the Fund's operations in November 1992.
2. Investment Advisory Agreement, Administration Agreement and Other
Transactions
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith
Barney Holdings Inc. ("SBH"), acts as investment advisor to the Trust. The Fund
pays SBMFM an advisory fee calculated at an annual rate of 0.45% of the average
daily net assets. This fee is calculated daily and paid monthly.
SBMFM also acts as the Fund's administrator for which it receives a fee
calculated at an annual rate of 0.20% of the average daily net assets. This fee
is calculated daily and paid monthly.
- --------------------------------------------------------------------------------
14 1997 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of Fund
shares and primary broker for its portfolio agency transactions. For the six
months ended July 31, 1997, SB received sales charges of approximately $59,000
on sales of the Fund's Class A shares.
There is a contingent deferred sales charge ("CDSC") of 5.00% on Class B shares,
which applies if redemption occurs less than one year from initial purchase and
thereafter declines by 1.00% per year until no CDSC is incurred. Class C shares
have a 1.00% CDSC, which applies if redemption occurs within the first year of
purchase. In certain cases, Class A shares also have a 1.00% CDSC, which applies
if redemption oc curs within the first year of purchase. This CDSC only applies
to those purchases of Class A shares, which, when combined with current holdings
of Class A shares, equal or exceed $500,000 in the aggregate. These purchases do
not incur an initial sales charge. For the six months ended July 31, 1997, CDSCs
paid to SB were:
Class A Class B
================================================================================
CDSCs $1,000 $83,000
================================================================================
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to
Class A, B and C shares calculated at the annual rate of 0.25% of the average
daily net assets for each respective class. In addition, the Fund pays a
distribution fee with respect to Class B and C shares calculated at the annual
rate of 0.50% of the average daily net assets for each class. For the six months
ended July 31, 1997, total Distribution Plan fees incurred were:
Class A Class B Class C
================================================================================
Distribution Plan Fees $171,488 $525,128 $13,089
================================================================================
All officers and one Trustee of the Trust are employees of SB.
3. Investments
During the six months ended July 31, 1997, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $50,479,929
- --------------------------------------------------------------------------------
Sales 20,036,620
================================================================================
At July 31, 1997, aggregate gross unrealized appreciation and depreciation of
investments for Federal in come tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $156,774,549
Gross unrealized depreciation (424,241)
- --------------------------------------------------------------------------------
Net unrealized appreciation $156,350,308
================================================================================
4. Repurchase Agreements
The Fund purchases (and its custodian takes possession of) U.S. government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day) at
an agreed-upon higher repurchase price. The Fund requires continual maintenance
of the market value of the collateral in amounts at least equal to the
repurchase price.
5. Reverse Repurchase Agreement
The Fund may enter into reverse repurchase agreement transactions for leveraging
purposes. A reverse repurchase agreement involves a sale by the Fund of
securities that it holds with an agreement by the Fund to repurchase the same
securities at an agreed upon price and date. A reverse repurchase agreement
involves the risk that the market value of the securities sold by the Fund may
decline below the repurchase price of the securities. The Fund will establish a
segregated account with its custodian, in which the Fund will maintain cash,
U.S. government securities or other liquid high grade debt obligations equal in
value to its obligations with respect to reverse repurchase agreements.
- --------------------------------------------------------------------------------
Smith Barney Growth and Income Fund 15
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
At July 31, 1997, the Fund had no reverse repurchase agreements.
6. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contracts. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are made or received and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Fund records a realized gain or loss
equal to the difference between the proceeds from (or cost of) the closing
transactions and the Fund's basis in the contract. The Fund enters into such
contracts to hedge a portion of its portfolio. The Fund bears the market risk
that arises from changes in the value of the financial instruments and
securities indices (futures contracts) and the credit risk should a counterparty
fail to perform under such contracts.
At July 31, 1997, the Fund had no open futures contracts.
7. Options Contracts
Premiums paid when put or call options are purchased by the Fund represent
investments which are marked-to-market daily. When a purchase option expires,
the Fund will realize a loss in the amount of the premium paid. When the fund
enters into a closing sales transaction, the Fund will realize a gain or loss
depending on whether the proceeds from the closing sales transaction are greater
or less than the premium paid for the option. When the Fund exercises a put
option, it will realize a gain or loss from the sale of the underlying security
and the proceeds from such sale will be decreased by the premium originally
paid. When the Fund exercises a call option, the cost of the security which the
Fund purchases upon exercise will be increased by the premium origanally paid.
At July 31, 1997, the Fund had no open purchased call or put option contracts.
When a Fund writes a covered call or put option, an amount equal to the premium
received by the Fund is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Fund realizes a gain
equal to the amount of the premium received. When the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss, if the cost of the
closing purchase transaction exceeds the premium received when the option was
sold) without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is eliminated. When a written call
option is exercised, the cost of the security sold will be de creased by the
premium originally received. When a put option is exercised, the amount of the
premium originally received will reduce the cost of the security which the Fund
purchased upon exercise. When written index options are exercised, settlement is
made in cash.
The risk associated with purchasing options is limited to the premium originally
paid. The Fund enters into options for hedging purposes. The risk in writing a
covered call option is that the Fund gives up the opportunity to participate in
any increase in the price of the underlying security beyond the exercise price.
The risk in writing a put option is that the Fund is exposed to the risk of a
loss if the market price of the underlying security declines.
During the six months ended July 31, 1997, the Fund did not write any options.
- --------------------------------------------------------------------------------
16 1997 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
8. Lending of Portfolio Securities
The Fund has an agreement with its custodian whereby the custodian may lend
securities owned by the Fund to brokers, dealers and other financial
organizations. Fees earned by the Fund on securities lending are recorded as
interest income. Loans of securities by the Fund are collateralized by cash,
U.S. Government securities or high quality money market instruments that are
maintained at all times in an amount at least equal to the current market value
of the loaned securities, plus a margin which may vary between 2% and 5%
depending on the type of securities loaned. The custodian establishes and
maintains the collateral in a segregated account.
At July 31, 1997, the Fund had no securities on loan to brokers.
9. Shares of Beneficial Interest
At July 31, 1997, the Trust had an unlimited number of shares of beneficial
interest authorized with a par value of $0.001 per share. The Fund has the
ability to issue multiple classes of shares. Each share of a class represents an
identical interest and has the same rights, except that each class bears certain
direct expenses, including those specifically related to the distribution of its
shares. At July 31, 1997, total paid-in capital amounted to the following for
each class
Amount
================================================================================
Class A $92,407,651
- --------------------------------------------------------------------------------
Class B 83,017,025
- --------------------------------------------------------------------------------
Class C 3,570,965
- --------------------------------------------------------------------------------
Class Y 92,984,675
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
July 31, 1997 January 31, 1997
------------------------- -------------------------
Shares Amount Shares Amount
=======================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 784,732 $ 11,788,565 1,784,241 $ 23,454,721
Shares issued on reinvestment 59,232 878,366 245,313 3,295,197
Shares redeemed (810,602) (11,951,646) (1,765,700) (22,970,126)
- ---------------------------------------------------------------------------------------
Net Increase 33,362 $ 715,285 263,854 $ 3,779,792
=======================================================================================
Class B
Shares sold 1,147,489 $ 17,129,020 2,434,025 $ 31,747,272
Shares issued on reinvestment 39,780 591,120 201,222 2,723,850
Shares redeemed (1,277,137) (19,048,043) (2,320,760) (30,178,477)
- ---------------------------------------------------------------------------------------
Net Increase (Decrease) (89,868) $ (1,327,903) 314,487 $ 4,292,645
=======================================================================================
Class C
Shares sold 76,743 $ 1,163,420 172,314 $ 2,259,911
Shares issued on reinvestment 1,103 16,432 3,845 52,358
Shares redeemed (10,403) (155,913) (48,539) (639,598)
- ---------------------------------------------------------------------------------------
Net Increase 67,443 $ 1,023,939 127,620 $ 1,672,671
=======================================================================================
Class Y
Shares sold 1,526,626 $ 22,371,995 5,451,289 $ 70,607,680
Shares redeemed -- -- -- --
- ---------------------------------------------------------------------------------------
Net Increase 1,526,626 $ 22,371,995 5,451,289 $ 70,607,680
=======================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Growth and Income Fund 17
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class A Shares 1997(1) 1997 1996 1995 1994(2) 1993(3)
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $14.30 $12.16 $9.62 $10.36 $9.58 $9.50
- -----------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.10 0.19 0.20 0.20 0.20 0.01
Net realized and unrealized
gain (loss) 2.39 2.33 2.74 (0.61) 0.81 0.07
- -----------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.49 2.52 2.94 (0.41) 1.01 0.08
- -----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.10) (0.20) (0.20) (0.19) (0.23) --
Net realized gains -- (0.18) (0.20) (0.14) -- --
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.10) (0.38) (0.40) (0.33) (0.23) --
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.69 $14.30 $12.16 $9.62 $10.36 $9.58
- -----------------------------------------------------------------------------------------------------------
Total Return 17.50%++ 20.97% 30.97% (3.93)% 10.70% 0.84%++
- -----------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $156,045 $133,272 $110,089 $95,054 $4,468 $3,520
- -----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.09%+ 1.12% 1.16% 1.41% 1.54% 1.41%+
Net investment income 1.39+ 1.48 1.77 1.86 2.00 0.28+
- -----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 10% 9% 15% 127% 79% 1%
- -----------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(4) $0.06 $0.06 $0.06 -- -- --
===========================================================================================================
</TABLE>
(1) For the six months ended July 31, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(3) For the period from November 6, 1992 (inception date) to July 31, 1993.
(4) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
18 1997 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class A Shares 1997(1) 1997 1996 1995 1994(2) 1993(3)
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $14.33 $12.19 $9.65 $10.38 $9.58 $9.50
- -----------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.07 0.13 0.14 0.17 0.15 (0.01)
Net realized and unrealized
gain (loss) 2.37 2.34 2.75 (0.62) 0.80 0.09
- -----------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.44 2.47 2.89 (0.45) 0.95 0.08
- -----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.07) (0.15) (0.15) (0.14) (0.15) --
Net realized gains -- (0.18) (0.20) (0.14) -- --
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.07) (0.33) (0.35) (0.28) (0.15) --
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.70 $14.33 $12.19 $9.65 $10.38 $9.58
- -----------------------------------------------------------------------------------------------------------
Total Return 17.11%++ 20.43% 30.23% (4.33)% 10.01% 0.84%++
- -----------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $158,448 $137,187 $112,891 $92,153 $68,144 $35,173
- -----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.59%+ 1.62% 1.65% 1.90% 1.99% 1.91%+
Net investment income 0.89+ 0.98 1.27 1.38 1.55 (0.22)+
- -----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 10% 9% 15% 127% 79% 1%
- -----------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(3) $0.06 $0.06 $0.06 -- -- --
===========================================================================================================
</TABLE>
(1) For the six months ended July 31, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(3) For the period from November 6, 1992 (inception date) to July 31, 1993.
(4) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Growth and Income Fund 19
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
Class C Shares 1997(1) 1997 1996(2) 1995
================================================================================
Net Asset Value, Beginning of Period $14.33 $12.19 $9.65 $9.91
- --------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.07 0.14 0.13 0.07
Net realized and unrealized
gain (loss) 2.38 2.33 2.76 (0.13)
- --------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.45 2.47 2.89 (0.06)
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.07) (0.15) (0.15) (0.06)
Net realized gains -- (0.18) (0.20) (0.14)
- --------------------------------------------------------------------------------
Total Distributions (0.07) (0.33) (0.35) (0.20)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $16.71 $14.33 $12.19 $9.65
- --------------------------------------------------------------------------------
Total Return 17.18%++ 20.43% 30.23% (0.58)%++
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s) $4,575 $2,958 $961 $8
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.58%+ 1.61% 1.62% 1.83%+
Net investment income 0.89+ 0.94 1.11 1.44+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 10% 9% 15% 127%
- --------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(4) $0.06 $0.06 $0.06 --
================================================================================
(1) For the six months ended July 31, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(3) For the period from November 6, 1992 (inception date) to July 31, 1993.
(4) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
20 1997 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
Class Y Shares 1997(1) 1997 1996(2)(3)
================================================================================
Net Asset Value, Beginning of Period $14.34 $12.16 $12.08
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.13 0.22 --
Net realized and unrealized gain 2.38 2.36 0.08
- --------------------------------------------------------------------------------
Total Income From Operations 2.51 2.58 0.08
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.14) (0.22) --
Net realized gains -- (0.18) --
- --------------------------------------------------------------------------------
Total Distributions (0.14) (0.40) --
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $16.71 $14.34 $12.16
- --------------------------------------------------------------------------------
Total Return 17.68%++ 21.48% N/A*
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s) $116,636 $78,192 $5
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.70%+ 0.73% N/A*
Net investment income 1.78+ 1.73 N/A*
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 10% 9% 15%
- --------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions $0.06 $0.06 $0.06
================================================================================
(1) For the six months ended July 31, 1997 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(3) For the period from November 6, 1992 (inception date) to July 31, 1993.
(4) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Growth and Income Fund 21
<PAGE>
Smith Barney
Growth and
Income Fund
Trustees
Lee Abraham
Allan J. Bloostein
Richard E. Hanson, Jr.
Heath B. McLendon, Chairman
Officers
Heath B. McLendon
Chief Executive Officer
Lewis E. Daidone
Senior Vice President and Treasurer
R. Jay Gerken
Vice President and Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Advisor
Smith Barney Mutual Funds
Management Inc.
Distributor
Smith Barney Inc.
Custodian
PNC Bank, N.A.
Shareholder Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is for the information of shareholders of Smith Barney Growth and
Income Fund, but it may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details about charges,
expenses, investment objectives and operating policies of the Fund. If used as
sales material after September 30, 1997, this report must be accompanied by
performance information for the most recently completed calendar quarter.
[SmithBarney Logo]
A Member of TravelersGroup[Umbrella]
Smith Barney Growth
and Income Fund
Smith Barney Mutual Funds
388 Greenwich Street
New York, New York 10013
FD0425 9/97
